Layla wanted a payment deferral on her car finance

Covid-19 Consumer Credit

When Layla faced uncertainty over her working hours due to Covid-19, she approached her car finance provider for a payment deferral – but it wanted to add extra interest to her loan. We established that the provider’s position was consistent with FCA guidance around temporary help for consumers, and explained to Layla why the response she’d received was fair.

What happened

Layla complained to us about how her car finance provider had responded when her income changed. She explained she’d got her new car on finance in early 2020, but her hours were then reduced due to the Covid-19 pandemic.

Layla told us that the finance provider had agreed to her request for a payment holiday. But she’d then been told that interest would still be added to her finance.

Layla had complained that she’d end up owing more, but the finance provider wouldn’t change its position. Unhappy with this outcome, she asked us to look into her complaint.

What we said

We asked the finance provider for records of the contact it had had with Layla. These showed she’d phoned the provider approaching two months into the agreement to explain that her work circumstances were changing and uncertain. She’d asked if she could have a payment deferral while she worked things out.

In response, the helpline adviser had suggested she defer the payment for a month in the first instance, but that a charge would be applied. When Layla asked what this related to, the adviser had said it was extra interest for having the finance extended – and would equate to about £60 at the end of the agreement.

The call ended with Layla saying she’d just end up in a worse position, so didn’t want to go ahead. The finance provider had then followed up with a letter offering a one-month payment holiday, including a breakdown of payments showing the impact of the deferral, and explaining Layla’s credit file wouldn’t be affected.

We noted that the call had happened before Financial Conduct Authority (FCA) guidance was published suggesting payment deferrals of up to three months. Even so, the helpline had offered Layla a deferral – and indicated that this might be extended.

We explained to Layla that, while we understood her worries about owing more money overall, it wasn’t wrong for the finance provider to apply interest. The FCA’s guidance highlighted that its measures were intended to give temporary help to those facing difficulties as a result of the pandemic. The extra interest reflected the fact the loan would be repaid over a longer period.

We decided the finance provider had responded fairly to Layla’s concerns, and didn’t uphold her complaint.