Working towards FCA compliance could see dealers and lenders move away from flat rate motor finance products to APR-based alternatives.
The change would be made in the interests of greater customer transparency and is likely to also be accompanied by the removal of customer fees for arranging dealer finance, said iVendi director James Tew.
He said: “One of the results of FCA compliance is that we may start to see a move in the market towards blanket APR-based motor finance rather than the traditional flat rate model that changes from dealer to dealer.
“The reason for this is simple. It will become increasingly difficult to justify widely different rates at different dealerships for identical products from the same lender and is probably against the spirit of what the FCA is trying to achieve.”
Tew said the demise of arrangement fees could occur at the same time as these have been helping to pay commissions and hold flat rates artificially low.
“Again, these fees can be very different from dealer to dealer and there is no obvious market reason for these variations nor a need for lenders to charge them in light of an APR model.
"There is a strong possibility they will disappear as dealers and lenders become more transparent when it comes to dealing with the customer.”
Lenders and dealers were gradually coming to terms with not just the letter of the FCA guidelines but also their spirit, Tew said.
“While the motor finance industry has not been anywhere near being among the worst offenders when it comes to unfair lending practices, there have been issues, and there is a growing realisation that we are seeing a sea change.
“Taken as a whole, dealers are realising that the FCA is serious in its intention that the customer has to be treated as fairly as reasonable possible.”
> The AM Finance and Insurance Compliance Conference takes place on November 18, at the Oxford Belfry.
The event will provide an objective appraisal of the FCA and its requirements whilst at the same time highlighting some of the pitfalls, debunking the myths and pointing out the positive aspects. The event will put the onset of the FCA into perspective and dispel some of the scaremongering which has perhaps obscured the industry’s perception of the organisation, its goals and its remit to work with suppliers to deliver a fair and transparent service to customers.
For more details email firstname.lastname@example.org.