The FLA has renewed its call to the Government and the Bank of England to take urgent action to support the non-bank lending market. New figures released today by the Finance & Leasing Association (FLA) show that FLA members provided just over £138 billion of new business in the twelve months to March 2020. Of this total, £44 billion was provided by non-bank lenders.
Stephen Haddrill, Director General at the FLA, said:
“The asset, consumer and motor finance markets have been hit hard by the measures taken to deal with the coronavirus crisis, with a 20% fall in new business in March alone. FLA members have also faced almost 1.2 million Covid-19 related requests for forbearance, of which 75% have already been granted. The industry is committed to supporting their customers during these exceptional times.
“Urgent action is needed – in days, not weeks – to deliver financial support to the non-bank lending sector to ensure that we maintain a financial services sector that is diverse, innovative and competitive.”
UK CAR TRADE CANNOT ABSORB RETURNED CARS
The harsh truth in this situation is that the UK car dealership network could not cope with say 200,000 leased cars being returned if contract holders gave up and handed the keys over. But simply cancelling three months payments, because that is what deferring actually means in many cases – lenders will probably never recoup that money – is damaging the bottom line of the lending companies.
Recently a spokesperson from StepChange, the banking industry charity group said;
“It’s clear there are still people in danger of experiencing real hardship, as a result of problems with their car financing contracts. We would urge firms to do all they can to anticipate this and to treat their clients as fairly as possible in the coming months.”
He added that lenders could stop people from falling into problem debt by holding off “treating non-payments as defaults and by offering appropriate forbearance to those who need it.”
The problem for everyone involved in Britain’s lease car boom is that by giving the green light to a type of soft default, lenders, dealers, and ultimately manufacturers, all take the risk that the bubble will not burst further down the line if there is a deep recession and people lose their jobs. FCA guidance is clear, people in debt are now supposed to be helped – if that means writing off debt, then so be it.
But does that ultimately mean that renting a Merc for £550 a month on paper, actually means you pay what you can afford, if you get into financial difficulties? Tough choices ahead.