James Tew, director at Ivendi, writes:
"Last week, the FCA made payday loans lender Wonga write off £220 million of debt that 330,000 customers had accrued. Those figures are worth repeating. That’s two-hundred-and-twenty-million pounds and three-hundred-and-thirty-thousand people.
However you look at it, they are big numbers.
It is also worth noting why the FCA did this. Their director of supervision was quoted as saying: “We are determined to drive up standards in the consumer credit market. This should put the rest of the industry on notice – they need to lend affordably and responsibly.”
Now, no-one is suggesting that anyone operating in the motor industry has lent with the gleeful abandon of some payday loans companies. By comparison, the worst operators in our sector look like angels.
However, the Wonga case should drive one point home: the FCA are very, very serious about protecting the consumer.
At the moment, it is still possible to find some dealers who believe that they can make a minimum effort and pay lip service to the FCA. To them, I would point to the numbers in the first paragraph of this piece and ask them whether they believe that their attitude is the right one? Do they still feel confident?
The lesson for motor finance companies and car dealers is simple. In the new FCA-regulated world, you cannot get away with operating as you did previously.
You must follow the provided guidance closely and you must genuinely make an effort to ensure customer affordability.
The good news is that the majority of lenders and dealers, those who were already operating responsibly, are looking at both the spirit and the letter of the FCA guidance, and genuinely embracing the ethos. Many believe that it could even boost the appeal of motor finance.
However, the Wonga message is one that the motor industry cannot ignore - you cannot adopt a business-as-usual attitude without taking some very large risks indeed."