By Tony Willard
From October 1, dealers need to be ready to register for full authorisation with the Financial Conduct Authority (FCA). “The temperature is certainly rising in terms of dealer concerns about the requirements for FCA compliance,” said Shaun Harris, sales director at Codeweavers.
The FCA, which replaced the Office of Fair Trading, was tasked by Parliament to ensure consumers taking loans are treated fairly. Any dealer that has failed to apply since April 1 for interim permission faces stiff financial penalties if they continue to provide consumer credit after next month. By mid-September, about 9,900 dealers had interim permission.
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♦ Process may benefit both dealers and consumers ♦ Software designed to help dealers achieve compliance ♦ GAP insurance not included in loans compliance |
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From October, the FCA will direct dealers and other businesses with interim permission to apply for full authorisation before April 1, 2016. Most have been given ‘landing slots’ sometime in the next six months.
While suppliers in the motor retail finance sector are optimistic that the process will benefit dealers as well as consumers, some dealers are concerned about the uncertainty surrounding the FCA.
Martin Hill, managing director at Frontline Solutions, said some franchised dealers who had received assistance on compliance from manufacturers were already used to working within strict brand guidelines.
“This rigour can assist with the demands of consumer credit regulation, especially with regard to the FCA application process,” he said.
“However, any dealer (franchised or not) that decided not to become authorised for general insurance in 2005 will find the new finance regime challenging. Regulation by a financial services watchdog can be onerous, to say the least.”
Hill said used car dealers had traditionally not been subject to the demands of gaining a franchise. “Some would say this is the reason they chose not to go along this route,” he added. “Regardless of franchised status or not, the regulator sees only a consumer credit intermediary – pure and simple.”
He said this meant that both franchised and non-franchised dealers would need to complete the same application form for FCA regulation – “the regime has been a great leveller in this regard”. Dealers would be given ‘landing slots’ in Q4 2014 or Q1 2015 so they could all be processed together.
Hill believed some dealers were struggling to prepare applications for full compliance because the process was intense.
“The FCA is asking some dealers to outline processes and systems that many of them do not have and are struggling to create,” he said.
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“The process demands documents such as regulatory business plans and that the dealer can actively demonstrate the customer is the central focus of its business activities and is treated fairly. In many instances, the dealer simply doesn’t know what information the FCA is asking for, or they cannot provide the information as they do not track it.” Dealers have an expectation, that ‘someone else’ will take care of this for them. Manufacturer / finance houses / compliance gurus and consultants / trade bodies, the list is endless. When will the motor dealers realise that there are regulatory matters that are 100% their personal responsibility? Sure, by all means gather as much help and opinion that is available, but there is no substitute for reading the handbook rules and governing principles. Ah, will come the reply, it’s hard, the language isn’t always easy to follow and a hundred other reasons why it can’t be done……. Rather than accepting some things just are 'hard' and need the effort. After all this shouldn’t be wasted tick box time, it should all be quality transparent business practice. Much of it may exist already, but most of which will not be recorded, monitored or easily articulated. Your customers deserve to be treated fairly, and you have a regulator who insists on it. A regulator who is so much better than the FSA, in explaining itself, publishing speeches with direction, issuing guides / notes / and help, to try make it easy as it can for all the firms it regulates. Engage, evolve, do the detail, truly understand that ‘you just don’t sell cars’ – you are well and truly into selling F&I, and your customers deserve you do the very best by them. Do it for the right reasons, the customer, but keep in mind, the regulator will likely show their teeth soon, and the vultures of the CMCs will be circling all too soon. I return to the extract at the top – it’s phrased as though it’s in some way unreasonable for the FCA to ‘demand’ such documents. Isn’t there another way of looking at it – it’s not what the regulator is asking for per say (though a lot is prescriptive) but what the business should already be able to provide the FCA (or anyone, including themselves and customers) to explain that they are meeting the requirements. Why don’t dealers track this? Maybe because, the true ethos of TCF eludes them, or that they still don’t see the rules apply to them, as it’s someone else’s responsibility? If you are an Approved Person, or a director with significant functions, it’s your responsibility.