In Focus Collections


Reviewing the motor review


What will the Financial Conduct Authority’s Motor Finance Review mean for the industry?


Adrian Dally Head of motor finance, Finance & Leasing Association adally@fla.org.uk


In its Motor Finance Review final report, published in March 2019, the Financial Conduct Authority (FCA) said that they would consult on changes to their rules in a number of areas. In October, we finally saw these proposals,


one of which was to limit dealer discretion. Another was to make clearer rules on commission disclosure. We should expect 2020 to be the year when these new rules will come into force.


Cost and impact There has been much discussion about the potential costs and impacts (including on dealers) of the FCA’s proposals. In their cost-benefit analysis, which accompanied the consultation, the regulator said that it had not just looked at impacts on lenders, but also on dealers and on the wider automotive sector.


The FCA, as a public body, does not, of


course, want to be in the position of doing the right thing on finance commissions while having a disproportionate effect on the wider sector such that consumer choice is adversely affected. Is it, therefore, possible to maintain or


improve customer service standards in dealerships when the new rules come into force? Certainly. There are hundreds of dealers out there who do just that now, and we have training programmes like SAF, paid for by our members, enabling dealership staff to attain the competence that they need. The FCA’s own work looked at the full


range of dealers, including the very small ones, and generally found a positive picture. It is actually quite easy to understand what


good looks like, both to the FCA and to society as a whole. I like to think of it in terms of when my mum buys a car. If I am happy about the way she is


treated in the dealership, then that is what good looks like.


There has been much discussion about the potential costs and impacts (including on dealers) of the FCA’s proposals. In their cost- benefit analysis, which accompanied the consultation, the regulator said that it had not just looked at impacts on lenders, but also on dealers and on the wider automotive sector


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Valid conclusions The FCA motor-finance review was, strictly speaking, ‘exploratory work’. It was a process aimed at understanding in detail how the motor-finance sector works and what context it sits in. As ever with an exploratory piece of work,


it was a fact-finding mission, so with the FCA being a very data-driven organisation, it had a very high data content to it. The work we have done at the FLA suggests that, however you cut the FCA’s data, their conclusions are valid.


www.CCRMagazine.com But, do not forget the FCA’s broader


conclusions too. They are in effect saying that competition in the sector is strong and broadly works well in the interests of its customers. There is also a broad conclusion that the


four types of product that necessarily exist on the market, given the wide diversity of customers – unsecured personal loans, HP, PCP, and PCH – are the products that are needed and they map appropriately on to the sector’s seven million customers. The FCA’s final report also had things


to say about what information is given to consumers at the point of sale, especially in dealerships. It is valid to ask whether we can, hand-on-heart, say that the conversation in the dealership always goes in a helpful, consumer-orientated, and FCA-compliant way. The FCA found particular patches of less


than good practice, particularly in the independent dealership and used-car space, but nowhere is immune from this. It is right that this is addressed. The


FCA’s proposed new rules on discretionary commission models and commission disclosure do this. As does our long-standing, and recently upgraded, SAF programme.


Commissions The language of the FCA’s final report and consultation paper on commissions is tough, as you would expect a tough regulator to be. However, when you look underneath, what the FCA is actually saying on commission disclosure is that the rulebook that they have inherited is not black and white, but grey.


December 2019


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