Zopa has said that reduced payments are often a better option than payment freezes for car finance borrowers in financial difficulty, following the introduction of new rules for the sector.
The peer-to-peer consumer lender provides hire purchase agreements to individuals via dealers, direct via its website, and through comparison websites.
It has outlined how it is helping these borrowers, following the Financial Conduct Authority’s introduction of new rules to support consumer credit customers in difficulty during the pandemic. As part of the package of support measures, motor finance firms must offer a three-month payment break to customers in financial difficulty due to Covid-19.
Zopa said it has several options for impacted customers, for example reduced payment plans or freezing payments for a period of time, but the right action depends on individual circumstances.
The platform said a payment freeze might not be the best option for some customers, because the missed payments start to build-up and borrowers need to be able to pay them in the future.
Zopa said that often, for a short time, a reduced payment plan is the better solution, as borrowers continue to pay off the balance of their hire purchase finance and minimise their account arrears growing.
It if offers a payment reduction or freeze arrangements to borrowers impacted by the pandemic, the platform will not report this to credit reference agencies for the duration of their initial arrangement. Therefore customers’ credit files won’t be impacted during this time.
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The platform said it will be following all relevant measures from the FCA as well as updating investors.
“We believe the announcement is another positive move from the FCA to protect those who need help during these uncertain times,” Zopa said.