Conference calls for postponement
Confusion surrounding legislation – some in force, some pending – was lifted at a conference staged jointly by Automotive Management and Sewells Information & Research.
Be prepared for dealer legislation, at the International Conference Centre, Birmingham, was notable for the clarity of speakers' addresses on a series of complex issues.
The conference was staged in partnership with the Finance and Leasing Association in the light of growing concern over regulations governing the sale of insurance.
The General Insurance Standards Council (GISC) was formed a year ago following the new Labour Government's commitment (after its election in 1997) to give more power to consumers.
At the conference, there was support for the objectives of the regulation though this was balanced by a belief that more time was needed for its successful implementation. Twenty-four hours later, a delay was announced.
The second and associated topic was the enforcement of the 1998 Data Protection Act. One official made equally clear the wish to work with the industry – and the availability of prosecution when needed.
Three leading independent finance houses – Black Horse, Capital Bank Motor and First National – broke new ground by jointly sponsoring the conference which was filled to capacity.
They did so because of a combined belief in the need for those in the industry to raise professional standards and to respond to the calls for more consumer power.
In time there may be a balance between those objectives.
The rise in consumer power in the late Nineties has produced new legislation and a professional response from many in the automotive industry.
GISC pledge to dealers: 'no sudden crackdown'
Two dealer group executives told the conference how they were adopting the new GISC codes and using them to help improve other processes within their organisations.
Ryland and Dutton-Forshaw, the first publicly quoted, the other private, have differing business structures. Dutton-Forshaw has a single umbrella business entity which is registering with GISC, said company secretary Alan Booth. Ryland, by contrast, has a number of separate businesses covering different areas, and these would all be registered separately, said Paul Morton, Ryland group personnel development manager.
Both were retail motor industry representatives on a conference panel. Mr Morton underlined the importance of the issue not just for his group, but the industry as a whole. Ryland, he said, was a 2,000-strong business, with 600 sales staff who would be directly affected by the rules.
Yet turnover among sales staff was high which would lead to “logistical, pragmatic problems of keeping staff trained”.
He appealed for a “certain amount of leeway” from GISC on the staff training issue. GISC policy officer Branko Bjelobaba, in the same Q&A session, assured dealers that there would be no sudden crack-down on those who had not completed training and other requirements. “As long as we can see that the work has started, that would be satisfactory,” he said.
Despite the problems, Mr Morton said: “We have taken the decision to register because the advantages of putting GISC processes in place, if we are clever, can be applied to all our processes.”
Alan Booth picked up on a major possible stumbling block for the whole industry, however. The conference heard that each of three major finance houses sponsoring the conference had said that at this moment they were not planning to register with GISC.
To them could be added GE Capital Woodchester. Marketing manager Graham Filmer, a delegate at the event, said: “We're not signing up yet. The timetable isn't fixed. There are too many imponderables at the moment.”
Mr Booth said: “Dealers have been reliant on finance houses for information and training and I find it a bit disturbing to hear they are still talking to GISC about interpretation and regulatory issues.”
The finance houses still stressed the importance of the new regulatory framework. Clive Currier, of First National, said choices dealers and finance houses made about membership of GISC would fundamentally affect the way they worked with each other, and what each could sell as an insurance product.
Nick Rycroft, of Black Horse, said: “If you have competing products – that is, more than one product available to offer to a customer – you must be a member of GISC or else remove the competing products.”
Paul Jordan, Capital Bank Motor director, said of the proposed changes: “In the long term the consumer benefits. The largest number of insurance cancellations occur in the first 30 days after the cover is sold. This means customers are signing up to something they don't know or are unsure about. I think the changes will mean business is more profitable in the long term.”
Tim Ensor-Clinch, legal adviser to the Retail Motor Industry Federation, said customers of GISC members would expect them to act fairly and responsibly and provide information on cost including commission. GISC members would also have to ensure their employees were competently trained to do their job and that the supervision chain is adequately supervised. Training records also had to be kept.
RMI alert to bodyshop on rules
Outsource insurance providers such as bodyshops could get caught-up in GISC rules, warned Retail Motor Industry Federation legal adviser Tim Ensor-Clinch.
Processing by bodyshops of insurance claims for customers could involve liaising with agents or insurers regulated in the GISC supply chain. Under the rules (yet to be upheld), non-GISC members could not trade with members, or vice versa.
Mr Ensor-Clinch reassured dealerships that in-house warranty schemes were not covered by GISC rules because they were not insurance backed. The GISC could also consider an individual waiver in relation to professional indemnity requirements. He said: “It is useful for the GISC to agree to this in circumstances where the member can demonstrate that they have sufficient financial resources to meet claims arising out of any negligence to the limit required by the rules.”
Mr Ensor-Clinch said that as membership of the GISC was voluntary, he predicted that smaller dealerships could be put off by the red tape.
Claims for damages could follow mistakes over data
A motor dealer's failure to deal responsibly with a customer's personal data could lead to a substantial claim for damages, said a speaker.
Diane Williams, head of compliance at Callcredit, a new credit agency, presented a case history to illustrate a chain of events which could lead to trouble.
“Imagine a woman about to buy her fifth new Vauxhall Astra,” she said. “She's the sort of customer who knows little about cars or the way the motor industry works. She loves Astras and buys one every two years to ensure reliability.”
Mrs Williams said the imaginary dealer offers to arrange finance and sends the proposal to five companies. The customer is told one has agreed to advance the money.
A week later, events which disturb her start to unfold. A letter from one of the other finance houses expresses disappointment she did not select them but offers a low interest rate credit card.
Another writes to express regret she decided not to go ahead with them and says her details will be kept on file. It is only then she realises a number of finance houses hold her personal details.
“The woman hears in a radio interview how she could, under the Data Protection Act, get a copy of her file from a credit reference agency,” said Mrs Williams. “She becomes the customer from hell, shouting in the showroom and impossible to calm down.”
The customer receives a call from the dealer after six months suggesting a service for the car which she welcomes.
But, two years later, comes the regular service call and by then she has bought an Astra from another dealer.
Then her ex-husband – who she left because of his violence – calls into the first dealership because he is trying to trace her. He sees a letter left lying around, notes her new address and goes round and beats her up which leads to a £25,000 damages claim.
Mrs Williams said: “Dealers can avoid a set of circumstances like this by making sure customers are told exactly what is happening when they apply for credit.
“They should make time for customers to sit down and read something which explains the procedures such as expecting a call from the service department. Dealers should also keep customers' personal details out of sight and ensure they keep records up to date.”
Lawyer spells out need to keep personal data secret
A lawyer spelt out the detailed legal framework within which dealerships have to operate both data protection and the wider general insurance procedures.
Paula Howard, senior associate with solicitors Salans Hertzfeld & Heilbronn, said the Data Protection Act, updated in 1998, had been expanded to include information held on computer and paper files. Security measures which might be applied to computer information also had to be applied to paper files.
“Don't leave bits of paper with personal information – about staff or customers – lying around in the office,” she said.
Data processing, an important issue for dealer staff, was covered in the 1998 Act by a wide definition – obtaining, holding, recording, deleting, disclosing and retrieving. “Any action relating to data is likely to amount to processing,” Ms Howard warned.
Dealer staff were under an obligation to ensure the information they procured from customers was obtained freely, was specific and that the consumer was properly informed about the implication of giving the information. Any consent given by the consumer should not be considered to last forever, and could be withdrawn at any time, Ms Howard said.
That was mostly covered by schedule two of the Act, but where the information obtained was deemed to be sensitive, the customer had to have clear written information on the implications of giving that information, she said. Financial, personal or medical information could fall within these categories.
All customers had an absolute right to stop direct mailing, and did not have to give a reason. Ms Howard said it was not possible to get round this by sending marketing material with a routine service or warranty reminder.
Penalties for dealerships and other companies abusing data in this way could include the payment of damages.
Penalties for storing incorrect data could also be severe and consumers had a right to have a copy of any data held by a dealer on file.
The old system of registration under the Data Protection Act had changed and dealers had to renew their registration for a £35 fee.
Co-operation requested - 'but there is a gun'
Rules outlined in the Data Protection Act 1998 were based on common sense, said assistant information commissioner Phil Jones, but he warned failure to comply was a criminal offence.
“They are not an optional extra,” he told delegates. “You cannot ignore them and hope they will go away.
“It's not as if you can apply them when you are feeling virtuous and when you are feeling hard-headed you ignore them. Failure to notify and inform us about what you are doing with personal data is a criminal offence.”
Mr Jones, a senior Office Information Commissioner official, said the Act adhered to eight principles which imposed obligations on anyone processing data to make sure it was accurate, secure and relevant. The first was that personal data should be processed “fairly and lawfully”.
The broad role of the Commission was to promote compliance with the Act and its standards. The Commission also monitored compliance with the Act and had the power to put a company on legal notice to ensure it amended its processing activities. The company could appeal.
Mr Jones said it was also illegal to obtain information by procurement: “You must not blag or cheat information out of anyone with deception for your own private trading purposes.”
There was also an obligation for transparency so that an individual had a good idea what the information was being used for and what the consequences would be on entering any agreement. They need to know if it was being passed on.
Mr Jones said: “You need to use your common sense and make sure people do not get any surprises. You are obliged to make sure that so far as is practicable, the person has been provided with, or you have made readily available, the relevant information.”
He was optimistic and confident that most companies complied with the Act without the commission putting a gun to their heads. “But just to let you know,” he said, “there is a gun.”