Author: Richard Jones, managing director, Black Horse (pictured)
As I write in early January, the FCA’s final report on its review into the motor finance market is imminent. Its interim announcement last year covered a number of positive aspects on how the market is working and focused on areas such as commission structures, customer understanding and assessing affordability.
The FCA found that the growth in car finance has been primarily driven in lower-risk customer segments and that rates of arrears and defaults remain low, comparing favourably with other types of lending.
This is good news and reflects the professionalism of those who have adapted to recent regulatory changes. I believe it also reinforces Black Horse’s ongoing approach to go beyond adhering to regulations, working with dealers to embed the principles and culture and ensure fair customer outcomes – affordable, clear products delivered via a professional and transparent process.
We believe the remaining focus of the FCA’s work has been on commission structures and the depth of customers’ product understanding through the buying process, which, in the interests of providing transparency and fair value, are to be welcomed. The FCA has a good grasp of the particular commission structures that may carry a higher risk of poor customer outcomes.
At Black Horse, we provide strong finance propositions, but it’s equally important to us to work with dealers to get the customer proposition right. That includes providing affordability assessments and using clear and unbiased lower-risk commission structures. Our prudent approach to customer affordability and responsible lending will continue.
My key reflection is that the market has progressively adopted higher standards over the past three years, operating positively to provide good customer outcomes and fair value. However, the FCA is increasing its focus on these areas across a range of financial services. Progression isn’t a choice, it’s a necessity. The bar for that is set by our customers’ experiences of other purchases and services, which is always rising.
I look forward to understanding the outcome of the FCA’s work and to working with our dealer partners to provide continued support both for them and for customers.