FCA’s compliance consultancy consumer director Andrew Smith has warned dealers that they will need a “dramatic culture shift" ahead of the Financial Conduct Authority’s (FCA) 2018 review.
In advance of the review, dealers need to understand the end-to-end customer journey and ensure the entire process is transparent as well as paying particular attention to vulnerable customers, affordability and adequate disclosures.
Smith will deliver his views at Automotive Management Live’s F&I theatre.
The one-day expo at Birmingham NEC on November 9 will include ‘insight’ theatres covering the new data protection rules (GDPR) and the used car market as well as F&I.
Smith (pictured) said: “Dealers need to be confident customers fully understand their finance contract and the terms of conditions. They need to have processes in place to identify vulnerable customers and look at how those customers are treated, without necessarily excluding them from access to a finance product. Also affordability and how this is assessed needs to be evidenced. It is very dangerous to adopt the attitude that customers can decide for themselves whether they can afford a certain product.
“Throughout the entire customer journey, dealers need to adhere to the six FCA ‘outcomes’ of treating customers fairly (TCF) and, above all, evidence this.
“I personally don’t think the vast majority of dealers, brokers or anyone involved in finance is purposefully and intentionally deceiving or misleading customers. That’s not to say finance is being sold properly in line with the regulations all the time. There’s an in-built culture around the sales process which includes practices acceptable a few years ago but the FCA would not necessarily now consider compliant.
“It’s not about the culture of putting the customer first or treating them fairly as I think absolutely that exists, but the culture of operating in a professional finance landscape which needs to change. The sector has moved from operating in a lightly regulated environment to one which requires dealers to deliver financial services to the highest standards with all the belts and braces and evidencing absolutely everything. This is where the culture shift still needs to happen.
“There are three layers of control: on the showroom floor where the sales executive sells the funding; the processes which provide managerial oversight; and the policy and governance at board level. All three layers have to mirror each other so what’s in place at policy level has to be carried out in the showroom.
“Dealers should take a hard look at how they identify a vulnerable customer and how they assess affordability which is difficult to define and implement, but needs to be tackled. Dealers need to understand that sometimes the best course of action for a customer is to say ‘no’ which very much goes against the grain, not because they want to gain a sale, but because they want to genuinely help someone into a new car. This mindset has to change and will be fundamental when the sector comes under closer scrutiny from the FCA.”
With the industry coming under fire in the media amidst accusations of mis-selling PCPs and potentially more negative press on the horizon, Smith will also debunk some of the myths which have arisen to allay dealer fears.
Free to attend for dealers and manufacturers with pre-online registration, AM Live builds on last year’s successful expo.
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