In Focus Consumer Credit
Ascent performance group
Left-right: Adrian Dally; Amanda Brandon; Andy Dodd; Anne Atherton
Do you agree with the findings published in the Financial Conduct Authority’s (FCA) Motor Finance Review (March 2019)? What could the industry do to improve with regard to these findings? PC: There are observations within the report that I would perhaps take issue with, as certain concerns are not representative of the vast majority of the industry, equally in the last 12 months the industry has implemented positive changes. However, make no mistake the report
makes many relevant and sensible suggestions to improve the motor-finance process to ensure better customer outcomes. So my message to lenders is to embrace
the report, and urgently look at their own proposition very critically. Pre-contract processes, affordability
assessment are both key, as is ensuring that any remuneration package does not lead to inappropriate actions by introducers. Consistency is key for customer offerings,
taking account of credit risk. I believe that our industry is robust, and has had to adapt and improve over the years to align itself with new regulations and market changes. It is certainly a tough and challenging
environment for the automotive industry as a whole, but embracing the FCA recommendations should provide a more assured future.
SB: I think that the industry has been on a journey with the FCA for some time, starting to reduce or remove part of the DIC and getting all the communication right there. It was probably a relatively slow journey, which it always is when it is not in law. So where the regulator goes with these rules, I do believe that it was predominantly
22 How they do the commission disclosure
I believe that our industry is robust, and has had to adapt and improve over the years to align itself with new regulations and market changes
the direction that the industry was going already, but it was just never going to get there in the timeframe. So I think that in the main it is a good thing. It is interesting because the industry is a
bit different, it is not special, and it does not need a different way of being regulated, but a consumer is only getting finance because there is a product, and we are the only part of the industry where that is the case. And most of the people selling the finance
are actually a company which is not a finance company, they are a company that sells cars and they have a finance person in the office. So it is not an easy place to regulate because you are almost trying to regulate a single individual in a company. The expectation of companies is generally
quite different and there is definitely some understanding that we all need to have on that, which is why part of the output is auditing of firms and dealerships. That is an area where we can be pretty weak as an industry and certainly all the noise coming through is asking the FLA to do something for us. Because we, as a firm, as a specialist
lender, we do a lot of work on this because it is commercially sensible to do. I do not think that there is anything in the rules that is particularly wrong.
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will be interesting, there are middle-men and a lot of business now comes through brokers, so what are you disclosing: are you disclosing commission that is paid out to the broker or what they pay out to the dealer? We all need to understand how this will
impact upon us from a competitive position. But generally, I think things are going in the right way and the risk is whether lenders have really taken on board to do the spirit of the law? The FCA will put a line in the sand and
there are two ways of approaching that: either from a perspective of ‘we will get over that line’ or ‘I have my sales hat on so I want to look at the competitive advantage of being absolutely on the line’. When you are only just on the line, then you are almost never acting within the spirit of it, you are putting in the commercial aspect: it is legal, but is it right for the customer? The risk is that the industry does not get it
and the regulator will need to demonstrate that it is not enough to be on the line, we need to show that we are accepting the spirit of it, or else they will move the line and make it much more difficult to do business, which is what they did with interest-only mortgages and even now, people are just learning how to do interest-only mortgages properly five years down the line. It is one of the reasons why I try to be quite vocal: we really have to push that ‘commercial advantage’ is ‘what is right for the customer’, it is not ‘how close can I get to the rules’. It is a mentality change and it is not 100%
the commercial view, but if it is right for the customer, then the regulator will step back, and we need to show we understand what they want rather than trying to negotiate how close we can get to the line.
December 2019
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