On January 1, the first motor trade firms had to put in their application for full consumer credit permission from the Financial Conduct Authority.
As Grant Perks, sales compliance specialist at Alphera Financial Services, put it: “This is just day one of the rest of our lives dealing with the FCA. It is a culture change.”
Spencer Halil, BMW Group Financial Services group brands general manager, said the FCA had changed the priority for finance suppliers.
“We have a hierarchy of priorities within our business. It always was dealer first. The dealer was our customer, and the end user, the driver, was their customer.
“The priority has changed. The customer is our first priority, the regulator second, the dealer is third. It has to be this way. We believe that by satisfying all our responsibilities to the customer we will satisfy our responsibilities to the regulator, and in satisfying our responsibilities to the customer and regulator we will present better opportunities and more sustainable business for our dealers.”
Firms that applied for interim FCA permission last winter have been issued ‘landing slots’, which gives them a pre-determined three-month window to submit their full application. Some major dealer groups with their own finance companies, which will act as principals, may have already put in their applications.
Motor finance providers have been keen to emphasise the importance of dealers sticking to their landing slots. Doing so extends the interim permission while the FCA considers the application. Failing to do so means the interim permission ends, leaving the dealer unable to offer finance and criminally liable if he continues to do so while unauthorised. The FCA has teeth in this regard – in 2013, a former mortgage adviser who continued to advise clients despite having no authorisation was prosecuted and jailed for two years.
Some car dealers still in the dark on FCA's principles-based regulation
Dealers seem clear on the need for FCA authorisation, but some have told AM they still feel in the dark about what its principles-based regulation may mean in practice. Many see the advice of their lenders as critical guidance, but different lenders have differing interpretations of what the conduct the FCA may expect will look like.
Some lenders have told AM that it could be 12 months or more until the motor industry is more clear on what changes to current practices are required to ensure compliance and, in FCA parlance, provide “better customer outcomes”. This is because once the FCA has received sufficient applications from the motor trade it is expected to analyse them to see if any common practices in the motor finance market give it cause for sufficient concern to launch a market study and drive change.
Although one of AM’s polls last month found a majority of dealers (53.3%) felt the regulatory environment helped their business, a Hitachi Capital Motor Finance survey reported in last month’s magazine suggested only 29% of dealers thought the FCA would have a positive effect, with the same amount predicting a negative effect and 42% unsure what effect the changes would have. The uncertainty is reflected in a second AM poll this month, which shows 40% of dealers are unsure whether or not they will be FCA-compliant in 2015.