Motor dealers need to ask themselves four key questions when deciding whether to opt to join the new Financial Conduct Authority regulation regime, says motor dealer technology specialist iVendi.
From April 2014, the new body will oversee compliance for any motor dealer that wants to be authorised to sell motor finance, and promises to be much more stringent in its approach than the existing regulation by the Office of Fair Trading.
iVendi director James Tew said: “There will be many dealers who are looking at the level of compliance that the FCA is demanding and will be making a decision about whether to opt in.
“Taking time over this decision is the right way forward, we believe, because FCA compliance is not going to be a simple box ticking exercise. For many dealers, it will require a complete change of motor finance culture.”
The four questions dealers need to consider, Tew says, are:
• What do we currently earn from finance? Will foregoing finance opportunities significantly affect our profitability?
• Will not offering finance significantly affect our ability to sell cars? Will not having a monthly payment option put off customers?
• Will not being FCA regulated negatively affect how we are perceived, especially by existing and potential customers?
• What will be the cost of creating and following compliant processes?
He said: “For many motor dealers, we suspect that the answers to the first three of these questions are positive, with the decision being based on the answer to the fourth. Unfortunately, this is not yet easy to work out.
“Our general advice at the moment is to apply to the FCA for interim permission. This will only cost a few hundred pounds and will buy you time to find out more about the whole issue and the processes involved.
“However, it’s imperative to ensure dealers have the correct categories on their existing consumer credit licence before doing so. Most lenders are recommending C, D and E categories but G is another that may need to be considered and lenders are seeking further guidance and clarification on this matter from the FCA.
“Once interim permission has been obtained, it will allow you to work through the various compliance options such as fully authorised, appointed representative, introducer AR and introducer.
"There will be a transition period of six months from the April 1, 2014 and if dealers then think it’s too onerous they can then choose to opt out The industry, as a whole, is still coming to grips with the subject and in a couple of months, we expect the issues surrounding the FCA to be clearer.”
> David Gagie, senior advisor at the Financial Conduct Authority, is the latest confirmed speaker at the forthcoming AM Hit for Six Conference.
Gagie has extensive experience in the consumer lending, banking, credit card and internet payments industries and has advised businesses in the US, Canada, South America and Europe on consumer lending business strategy and risk management.
He is a former member of LloydsTSB’s retail banking board, where he was responsible for credit cards, personal loans and overdrafts, current accounts, payments and card acquiring and the ATM network.
At the FCA his focus is on consumer credit and at the AM conference he will be providing an overview of its newly published regulations on the matter and highlight expected processes and required actions from dealers.
More information on the AM Hit For Six Conference.
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