An internal audit of FCA compliance led car dealer Vertu Motors to halt sales of GAP insurance at two of its dealerships in September.
Michael Sherwin, Vertu Motors’ finance director and chairman of its compliance committee told AM: “If we have a poor internal audit result for a dealership in terms of their compliance with the FCA paperwork I switch them off from being able to sell GAP insurance.
"I did it for two dealerships in the last four weeks, which was hard for them because it was September.
“That’s what you have to do to make it clear to colleagues that this stuff is real and matters, and to comply with the regulation.”
It was a temporary measure. Once the dealerships had proven they rectified the issue identified by the audit then sales were allowed to resume, under close monitoring by Vertu’s audit team.
Such measures will be repeated by the AM100 top 10 car dealer should similar compliance issues arise in future.
Sherwin said he can see FCA regulation pushing along more consolidation in motor retail, as smaller operators face the same challenge yet without the resources and overheads of a large group such as Vertu Motors.
“It is putting bank type regulation onto the sale of cars,” he added.
“Yes it’s eating more time and resource because I’ve now got a committee to chair that I didn’t used to have.
"We have had to up our game as an industry in terms of our ability to identify the appropriate regulation and comply with it, and along with that comes a whole load of consultancy requirements and internal audit requirements.”
Asked whether the FCA’s principles based regulation is problematic for dealers, he said Vertu has put its audit function, including himself, between the principles and its staff at dealership level.
The dealer group has written its own rulebook, explicitly stating how it is interpreting the principles through its own experience and advice from external consultants, so that dealership staff know exactly what they must be doing, he said.