As we enter Week 5 of the ‘lockdown’ it is helpful to share some updates and reminders of the various national and local schemes that are in place, or in preparation, to help businesses and individuals

Coronavirus Business Interruption Loan Scheme (CBILS)

Many companies have now registered for this scheme and the approved banks that are administering it for the Government (40 accredited lenders ) are processing applications. Some companies that have received the relevant forms to complete online (much quicker that telephone applications) report difficulties in returning the forms via banks’ websites, which are timing-out due to the sheer volume of online traffic. If you experience this difficulty on weekdays we suggest that you try sending your forms well outside normal banking hours. If possible, try sending between 9.00 pm and 5.00 am when volumes are much lower.

If you have not yet applied for one of these loans you can still do so using the link mentioned above (40 accredited lenders ). Please remember that although banks are no longer allowed to demand Directors’ personal guarantees many of them are requesting Directors’ personal financial information, which is allowed under the scheme. If you do decide to apply for a loan please remember to update your business plan first as this will make the application process much quicker.

Once applications have been received by the banks formal offers will be issued and, if borrowers agree to the terms, acceptance forms should be returned immediately. We understand that lenders will then try to transfer funds within 3 to 5 working days.

Coronavirus Job Retention Scheme – also known as the ‘Furlough’ scheme (CJRS)

This ‘Furlough’ scheme is now in operation and if you intend to use it you should make an online application now.

Last week the Chancellor of the Exchequer announced an extension to the scheme so that it will now be operational until 30th June. The backdated claim start date remains 1st March. HMRC tell us that once claims have been received, verified and processed payments will be made within 6 working days.

Support from Local Councils

In previous Bulletins we told you that support payments such as grants and Business Rates Relief will be administered by Local Councils. If your organisation is eligible for support the Local Council in your area (relating to your business premises address, not your home address) letters will already have been sent to you. With many businesses closed, you may not know if your organisation has received a letter so we urge you to visit your business premises (allowable under the Government’s movement restrictions) to check if you have post from the Council. Not
all Councils are operating the same system but your letter will tell you what next steps, if any, you need to take.

All Local Council websites now have a dedicated section on Covid-19 and what local support is available to businesses. We strongly suggest that you visit your local website and check what additional support may be available as this will vary from area to area. You can find your Council link here: Contact your Local Authority

Current & new directives/support from the Financial Conduct Authority (FCA)

The FCA has already instructed banks and other financial institutions to offer the following support to individuals and businesses:

  • offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by Coronavirus
  • allow customers who are negatively impacted by Coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months
  • make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft pricing changes came into force
  • ensure consumers using any of these temporary payment freeze measures will not have their credit file/rating affected

Customers should contact their lenders (via a website is likely to be quicker than by phone) to request a loan or credit card freeze as lenders will not automatically apply such freezes to every account.

The FCA has decided that additional types of support should be offered; details have been published today and will be reviewed on Friday 24th April, with implementation due shortly afterwards. We will update you if any major amendments occur and the date on which the final package comes in to force. We will also advise you how to make any related claims. The proposed new measures are:

Motor finance

The FCA expects firms to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to Coronavirus. If customers are experiencing temporary financial difficulties due to Coronavirus, firms should not take steps to end the agreement or repossess the vehicle.

The FCA has also proposed that:

  • Firms should not change customer contracts in a way that is unfair. For example, firms should not try to use temporary depreciation of car prices caused by the Coronavirus situation to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. We will expect firms to act fairly where terms are adjusted.
  • Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to Coronavirus-related financial difficulties, firms should work with the customer to find an appropriate solution.

High-cost short-term credit (including payday loans)

The FCA is proposing that high-cost short-term credit (payday lending) firms will be expected to provide a 1- month interest-free payment freeze to customers facing payment difficulties due to the Coronavirus pandemic. This shorter period reflects both the much shorter length of most loans and, given that interest rates tend to be higher than for other high cost credit products, prevents firms from accruing additional interest during the freeze period. After the end of the freeze, the firm should allow the consumer to pay the deferred payment in an affordable way – whether for example, by 1 single payment after the end of the term or by a number of smaller instalments.

Other credit products

The FCA is proposing that firms that enter into Rent-to-Own (RTO), Buy Now Pay Later (BNPL), or pawnbroking agreements will be expected to provide a 3-month payment freeze to customers facing payment difficulties due to Coronavirus.

The FCA is proposing that firms should also take the following steps in relation to specific products:

  • pawnbrokers should extend the redemption period for the 3-month freeze period or, if the redemption period has already ended, agree not to serve notice to sell an item that has been pawned for that period. If the firm has already informed the consumer they intend to sell the item, they should suspend the sale during the payment freeze
  • if a BNPL customer is within the promotional period, firms should extend this by the length of the payment freeze
  • RTO firms should provide a 3-month payment freeze. In addition, if a customer needs the goods during the guidance period, repossession should not take place
  • if social distancing means that pawnbrokers and RTO firms are unable to redeem, collect or repossess goods, they should not pass on any additional charges or fees to the consumer

As for most other loan freeze arrangements, firms will be able to continue to charge interest during the payment freeze (except in the case of high-cost short-term credit). However, in the event that a customer requires full forbearance that interest should be waived. If a customer was already in financial difficulty, the FCA has existing forbearance rules which apply. These will include for example the firm considering suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments for a reasonable period of time.

We will issue further advice and guidance Bulletins as the Covid-19 situation develops.

Henry Boyle
1200 hrs 20th April 2020

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