One thing is clear, the FCA has motor finance in its sights.
And whilst the increased regulation of the industry over the past four years since the birth of the FCA has transformed the industry for the better, it’s clear that the regulator’s work in the automotive sector is far from done.
A statement from the FCA just last month was unequivocal. The first line read: “We are looking at the motor finance market to ensure that it works well and to assess whether consumers are at risk of harm.”
At the forefront of this and in line with the FCA’s focus on consumer credit compliance, PCP as a vehicle finance option is under particular scrutiny. The FCA is currently investigating whether there has been a ‘structural shift’ in how consumers in the UK buy cars.
This car buying habit is akin to how consumers in the US purchase vehicles and there have been recent reports that the FCA is currently liaising with the regulators and banks in the US to get input from them.
New car sales will be looked at more closely as most are now sold on PCP largely due to the manufacturer’s support, which means deals can be low rate or even 0% subvented deals. Used cars are not immune from this, though.
The FCA has made it clear that they will be looking at both car dealer sales processes for motor finance, as well as the quality of the information that is provided to allow customers to make an informed decision on the finance products themselves.
The fact that they have vowed to take forward a range of work to help them decide what ‘further interventions may be necessary’ will be welcomed by most in the industry, but will inevitably mean tighter regulation in most areas.
Whatever their findings overseas or here in the UK, the spotlight will fall on dealers and suppliers, their compliance checks, processes and ultimately their ability to treat customers fairly.
The industry’s need to meet the FCA’s compliance demands now and in the future is being met by digital finance platforms – not only for their capability to automate processes, demonstrate and track positive customer outcomes, but also because they are simple to use and help save time.
A single point of entry, fully integrated system is ideally placed to provide a consistent and measurable way of demonstrating robust systems and controls. Platforms invariably have compliance specialists that ensure all platform users receive the same fully-compliant service, from lenders and brokers to dealers.
Many dealers, from the biggest franchise groups to small independents, are seeing the benefit of adopting a digital platform as part of their F&I sales strategy.
In this sense, the FCA and F&I platforms are working convergently: just as the FCA is changing the industry for the better through tighter consumer credit regulation, F&I platforms are revolutionising the industry’s ability to meet those regulatory demands.
One thing is for sure, greater regulation of industry is on the horizon. It’s time to ask the question: how prepared for it are you?