Financial Conduct Authority regulations
Next year will bring a radical change in the distribution and sale of motor finance, said iVendi CEO James Tew.
The FCA will take over consumer credit regulation next April from the Office of Fair Trading and is expected to take a much firmer stance, fining those who fail to comply. It has already imposed multi-million-pound fines on Swinton Insurance for mis-selling.
Tew said there were currently 50,000 consumer credit licences in the UK, and 20% of these are not expected to renew once the FCA is fully enforcing its regulation from October 1, 2014. Very small independent used car dealers may choose to not face the expense of being compliant.
However, for the larger dealers who will still offer consumer credit there are several options: being fully FCA-compliant; becoming an appointed representative that still sells motor finance; being an introducer that simply lets the customer choose from a range of lenders; or stopping sales of motor finance completely.
Dealers will need to consider what they currently earn from motor finance, how their vehicle sales might be affected by not selling a monthly payment, and how customers will perceive their business if it is not regulated. In any case, dealers can apply to the FCA for interim permission with a 30% discount until the end of November.
Tew said he expects most dealers to be tied to multiple lenders. “Lenders will want to maintain growth and will actively want to make things easier for their dealers. Listen to them.”