Motorists who have fallen behind on credit payments for vehicles can yet again have their motors seized by lenders after the regulator announced the end of a repossession ban introduced during the pandemic.
The Financial Conduct Agency had introduced the special measures due to the exceptional financial hardship as a result of Covid-19.
It has this week confirmed that the ban will be lifted for cars and other products after 31 January, thought it has proposed for the restriction on repossession of homes to be extended to 31 March.
Car repossessions to restart: The FCA has drawn out plans for vehicle finance lenders to recommence seizing vehicles from customers who have fallen behind on repayments
Under normal circumstances, lenders can seize homes and goods if somebody falls too far behind on loan repayments.
However, the impact of the pandemic on peoples livelihoods saw the FCA take action last year to protect consumers from repossessions and introduced payment holidays for mortgages and car fiance.
While deferrals on payments are available for an agreed period of time, the FCA is now proposing that repossessions of items bought on credit – such as cars, of which around eight in ten are bought using a finance – can resume from the start of February.
Draft guidance has been published on the lifting of the ban, which the FCA is inviting comments on until 18 January.
In a statement released on Wednesday, the regulator said: ‘We now propose changing this so that consumer credit firms will be able to repossess goods and vehicles from 31 January 2021.
‘However, this should only be as a last resort, and subject to complying with relevant government public health guidelines and regulations, for example on social distancing and shielding.
‘Importantly, firms will also be expected to consider the impact on customers who may be vulnerable, including because of the pandemic, when deciding whether repossession of goods or vehicles is appropriate.
‘Our proposed approach reflects the different risks and harms that customers with goods or vehicles on credit are likely to face compared to those who are at risk of losing their home.’
It has this week confirmed that the seizure ban implemented last year will be lifted for cars and other products after 31 January
While the majority of vehicles continue to be purchased on finance, a huge decline in car sales in the last 12 months has seen demand for these products fall.
The Society of Motor Manufacturers and Traders confirmed earlier this month that registrations of new cars crashed to a 28-year low in 2020, with year-on-year demand down almost a third.
This shrink in sales was backed up by the latest figures from the Finance and Leasing Association, which show a fall in new business volumes of 24 per cent in November compared with the same month in 2019.
Adrian Dally, head of motor finance at the FLA, said: ‘This is a welcome move as it allows lenders and consumers to decide together on the best outcome.
‘If a customer still needs their vehicle due to vulnerability, lenders will of course take that into consideration, but where a customer’s circumstances have changed so that they do not need their vehicle any longer and repossession is the best option, it is absolutely right that lenders can now offer that solution.’
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