PRODUCT PARTNERSHIPS: FCA COMPLIANCE, A TIDY SHIP?

Members Only | 11/03/20

The Financial Conduct Authority (FCA) continues to focus on sales practices in the motor sector, and has highlighted throughout this year the need for those involved in the financing of motor vehicles, to ensure customers can
make an informed decision. 

Dealers should make sure their customers have all the relevant facts to make the most suitable purchase based on their needs rather than being presented with a product that best suits the dealer, whether that be increased commission, better retention rates, increasing sales or managing stock levels.

Being non-compliant can have serious consequences for regulated firms, it’s not something that can be put right retrospectively.

Recent cases show that FCA investigations can span many years with the impact
that large numbers of customers can
be affected by any adverse findings.

Subsequent compensation payments and fines can seriously damage a business both in terms of finances and reputation. 

Key points, FCA Motor Finance report:

• brokers must pay due regard to the customer’s needs and circumstances including affordability and any factors that that may make the product unsuitable

• a lower monthly payment should not always be promoted as the most attractive feature 

• outright ownership is a key benefit to many but is often ignored

• promotions must be balanced and not emphasise benefits over risks

• the SECCI must be provided in ‘good time’ before a credit agreement is made, if not it may be unenforceable

• the customer must have the opportunity to ask questions and take information away to review

• ownership and repossession issues must be highlighted

• arrangements with finance providers must be prominently communicated
to customers.

Giving compliance the resource it needs to ensure dealers manage their regulatory risk is a necessity, not a choice, and dealers need to quickly review their compliance oversight functions to ensure they are adequate and effective.

Otherwise, further FCA investigations could cause major problems. Ultimately, this is about putting the customer first and delivering a first class ‘informative experience’.

Done correctly, it will improve business performance. Done badly, business failure is a possibility. 

Nigel Wray
Managing Director,
Product Partnerships Limited