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What the FCA's new consumer credit rules mean for car dealers

Martin Parr, Alphera Financial Services’ UK FCA readiness manager, said as long as dealerships have been compliant with the recent Office of Fair Trading (OFT) guidelines, they should find themselves on the right side of the FCA rules.

However, there will be far more emphasis on proving compliance – electronic and paper trails need to be in place to show that the customer has been treated fairly at all stages and that customer needs have been placed at the heart of all business processes.

“Principles-led regulation is designed with the consumer in mind and this means that compliance is not always black and white. An approach which puts the customer at the heart of decision-making process will be viewed far more favourably under the FCA than one focused purely on profit,” said Parr.

“It is important, therefore, that dealers do everything within their power to create systems and processes that lend themselves to providing evidence of a cultural alignment with the fair treatment of customers.”

Louise Wallis, National Franchised Dealers Association  head of business development, said she was “pleasantly surprised” that the rules were generally in line with the NFDA’s expectations.

“Most of the rules are a straight lift of current legislation and guidance. Dealers currently compliant should have few issues, but will need to make a few changes to their processes and paperwork over the next few months to be ready for FCA authorisation. Where they need to make changes to comply, the NFDA has help available,” she said.

“It is too early to say what impact the changes will have on profit, although there is nothing in the rules that would suggest dealers will be adversely affected.”

Car dealers 'need to embrace credit changes'

The FCA is aiming first at those consumer credit sectors considered the highest risk. Its initial focus is on payday lenders, pawnbrokers and debt collection companies, as these are industries in which it sees an urgent need for better consumer outcomes.

Many in the motor finance industry don’t expect the FCA to actively pursue dealers until these other priorities have been dealt with, unless issues are raised with a specific motor retailer. Retailers such as motor dealers introducing customers to a finance provider are seen as low-risk, with an option of gaining limited permission with lower fees and fewer reporting requirements.

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