Changed job descriptions for dealerships’ business managers may be one outcome of the Financial Conduct Authority’s probe into motor finance.
That’s the belief of Andrew Smith, managing partner of FCA compliance consultancy Paxen Group, which provides F&I and compliance advice to the automotive retail sector.
Smith will review the recent FCA review of motor finance and share his expertise as a FCA subject matter expert to dealers during his Automotive Finance Outlook presentation at the Automotive Retail Congress on May 21.
Smith said: "The review isn't all bad news. In fact, the FCA has found motor consumer finance isn't anywhere near the state they had feared and have acknowledged that on the whole, we are doing a good job. Nevertheless, there are some areas which need to be addressed."
The FCA has concerns that dealers are tempted to push finance with higher APR because it equates to more commission under the ‘DiC’ (differentiation in charges) model, according to Smith.
In addition, the FCA is not convinced dealers are taking the time and trouble to properly understand a customer's affordability and suitability for PCP products. Thirdly, dealers still need to ensure transparency, especially that customers have a full appreciation of product terms and conditions along with an audit trail.
Smith said motor retailers also need to prepare for the enhanced senior management and certification regime which comes into force on December 9.
Previously the buck stopped at the board level as far as the FCA was concerned whereas senior managers in the business will also be held responsible for the conduct of the business and departments under their control, and he will advise delegates at the Automotive Retail Congress on what action they should be taking now.
Smith said: “There is preparatory work which needs to be done in advance. Brokers and dealerships should be working on this right now.
“This will have a significant impact on the franchised sector where the dealerships operate under the FCA authorisation of the ‘group’. It means it will no longer be just the group’s current Approved Persons who are held responsible for the compliance and conduct of the business but the managers in the individual dealerships where F&I forms part of their function.
“It’s a direct result of the banking crisis whereby the top executives were held responsible for actions of their employees but reportedly did not know what was happening further down the chain.
“HR managers will now have to devise new job descriptions for business managers and those with direct responsibility for the sale and provision of financial products and the conduct of the staff.
“There may be demands for higher pay.”
In 2016 Smith, then managing director of Consumer Credit Advisory Services, advised delegates at Automotive Management Live about FCA compliance.