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CCD: The new finance regulations explained

> Dealer guidelines on CCD from Black Horse

Apan-European Consumer Credit Directive being introduced on February 1 is designed to give the consumer more protection when taking out finance.

The CCD changes come under the Consumer Credit Act and Black Horse is going live with its compliancy changes on November 25 to ensure dealers have time to familiarise themselves with the new regulations before the 2011 deadline.

Other finance providers will have their own interpretation of CCD and will be going live with the regulations at different dates. This worried franchised and independent dealers at the AM roundtable, as they often deal with different finance houses, which will mean different interpretations of CCD going live at different times.

The Finance & Leasing Association has updated its SAF test with a new CCD module covering fundamentals which dealers need to adhere to.

Black Horse has highlighted the areas which will directly impact dealers and showroom process.

The CCD changes are limited to agreements for credit up to and including £60,260 (e75,000), but Black Horse is putting the new finance regulations in place for every deal, regardless of value.

Huw Beynon, Black Horse Motor Finance senior business support manager, said: “The situation we are facing is not the same as when FSA regulations came in which the dealer had to take responsibility for. CCD is the finance house’s responsibility, but our dealers have to deliver our requirements, so we’re trying to help them do that and make it as easy as possible for them.”

Black Horse believes there are three key areas which need to be addressed by dealers when offering finance to customers. 

  • Pre-Contract Credit Information (PCCI)
  • Pre-Contractual Explanation (PCE)
  • Affordability and change in circumstances

Pre-Contract Credit Information

Dealers will already be familiar with Pre-Contract Information (PCI) which must be given to the customer before signing a finance agreement. The PCCI will directly replace the PCI in the process.

Black Horse training consultant David Pilling said: “The PCCI is not a new process for the dealer, it just directly replaces the PCI, but the document is in a strictly controlled standard form, which will be the same for all lenders. As it is with the current process, the PCCI is printed off and given to the customer. They must be given the opportunity and adequate time to go away and review the document before signing.”

What dealers need to do:

  • The PCCI must be given to the customer in good time before they sign their credit agreement.
  • The PCCI is available any time after acceptance and a copy is prod-uced every time the document pack is printed.
  • Dealers must make both the PCCI and the credit agreement available to the customer if they wish to take it away for comparative purposes.

Pre-Contractual Explanation

The PCE is the biggest change CCD will bring to the showroom for dealers. It adds new process and two pages worth of new documents explaining to the customer about the finance agreement.

Dealers must now read aloud the sections of the PCE which are highlighted in bold before the customer signs their credit agreement. The customer must also be given
the opportunity to read the PCE document and ask questions.

The bold segments of the document which need to be read aloud will differ depending on what type of finance product has been sold to the customer (hire purchase, personal contract purchase or personal loan).

If it’s a distance sell, the passages in bold must still be read aloud over the phone. The PCE must then be posted to the customer along with the other documents.

Black Horse has also developed an online video option for use in the showroom which has a character to read out the different bold statements in the PCE. The video is available in either LetsUConnect or eQuips.

The dealer can’t email the video to distance customers, it can only be used in face-to-face meetings from a computer in the showroom.

Black Horse has developed a frequently asked questions (FAQ) section within the online PCE should any customer need to ask about the agreement and the salesperson needs support. The finance house has also set up a consumer “explanation helpline” which dealers can direct customers to if they need advice.

Beynon said: “The helpline is available as a last resort really.

“Dealers should attempt to deal with any questions themselves simply to avoid delays in the sales process, but the helpline is there if dealers or customers need it.”

Before the customer signs their credit agreement:

  • Dealers must give a copy of the PCE to the customer
  • The bold sections must be read aloud by the dealer
  • The customer must be given the opportunity to ask any questions they have about the finance agreement.

Affordability and change in circumstances

This is where dealers need to make sure the customer is aware of what repayments they need to make once a finance agreement has been taken, whether they can pay them and whether they think their circumstances might change which could affect them making the repayments.

It’s this part of the process where dealers need to make sure customers have a full breakdown of what it is they need to repay.

Black Horse has added in a regulatory requirement sheet as part of the new CCD process which allows the customer and dealer to check off that all key actions have been completed before the customer signs the finance agreement.

This helps to keep Black Horse on the right side of the law and will help to cover dealers with the “comfort of proof” that the correct process has been carried out. The dealer can keep the regulatory requirement form on file or if it’s been completed electronically, Black Horse will keep the record on file.

Decline notices

There is a new responsibility when informing customers they have been declined for credit.

It’s currently required that dealers agree with every customer that their details will be passed on to the finance house, which will then search them with a credit reference agency (CRA) and a record of the search will be left on the customer’s credit history file.
Beynon said: “In the future, if a dealer gets a decline notice through, the cust-omer needs to be given the details of the decline. It gives the customer the chance to investigate the details of the decline and rectify what’s gone wrong.

“This puts the customer in control of their credit reference record. We haven’t had regulations about this before, but I think it’s about time it happened.”

Right of withdrawal

The CCD gives customers 15 days from receiving their second copy of the credit agreement to give notice of an intention to withdraw. The right of withdrawal does not give them the right to withdraw from the purchase of the goods, so the dealer’s sale to the customer is unaffected.

Once the finance house has received notice from the customer, the customer then has 30 days to repay the finance house the full advance plus interest calculated at the daily rate shown in the credit agreement.

Partial early settlement

The customer now has the right to repay part of the agreement early.

While some dealers said they were seeing more customers ask to increase their monthly payments when they received a bonus, Beynon said overall there hadn’t been much overpayment from customers and Black Horse wasn’t expecting an increase in activity in the area.

Dealer discussion

Paul Bentley, Lookers finance and insurance director, said: “It’s not as scary as we first thought it would be and that’s in part thanks to lobbying from the FLA and Black Horse.”
Martin Boon, Cambria Automobiles group finance and insurance manager, said: “I remember seeing what changes FSA was going to bring to our business and it was an absolute nightmare. CCD won’t be like that.”

Brian Scott, Car Shops’ finance director, said: “I don’t think CCD will slow down the deal, we just need to tweak the sales process. It’s not going to affect that too much.”

 

Sponsor's Comment

By Paul Brotherton, Black Horse business support director

Ask 12 dealers to take time out of their hectic schedules to attend a breakfast roundtable discussion on new European legislation? On paper, it seemed like a tough sell. But as it turned out, it was nothing of the sort. The response on the day was extremely positive.
The session helped to unpick and demystify the minefield of legislation – making the complex simple is one of our core values.

Feedback was that we approached the subject in a fresh, accessible way. I definitely felt a greater sense of ease from dealers towards the end of the meeting, as the pieces of the jigsaw fell into place.

Our early decision to go live with CCD on November 25 was commended as a positive, pro-active approach. It was clear from dealers’ comments that our interpretation of the key aspects of the legislation was spot on.

We’re providing our dealers with the opportunity to undergo an e-learning module and our field sales teams, who have all been CCD trained, are helping them embed within their own sales processes.

This ‘Keep It Simple’ approach, which includes multimedia coaching guides and dealer guidelines packs, received positive comments as did our online solution and video presentation of the oral pre-contract explanation. This will take the burden of the most demanding piece of the legislation away from the dealers’ sales staff and ensure a consistent delivery.

It was clear dealers believe the use of technology and training is critical in not only ensuring compliance, but also in providing the customer with a professional experience.

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