FCA changes are afoot – are you ready?
Published: 29th October 2018
John Hughes, MD, Mann Island Finance
Acronyms are everywhere in the motor industry. FCA, TCF, GDPR…they’re everywhere we go! Knowing the lexicon of these is half the challenge.
Equally challenging, is the on-going necessity to be at the forefront of understanding and applying regulatory change. As an example of this, the SMMT has just published the news that new car registrations have fallen by 20.5%. At the heart of this fall are the challenges being created by WLTP and added confusion over diesel policy to VED changes.
In my conversations with dealers on the noise around possible FCA changes, there are some who are concerned, but many prefer to think it will be business as normal. In the absence of the final outcome, I can only work on the principle that the FCA’s continuing deliberations will result in change, as they accelerate efforts to understand our market and established industry processes.
I can confidently say changes will arise because they already are! New assessments of credit-worthiness are on the way and affordability, which needs to be consumer-focused will need to be assessed separately to credit risk, which is funder-focused.
In terms of transparency, the FCA generally seem happy with the approaches being adopted. However, their mystery shopping exercise may highlight required process developments to ensure car buyers know exactly what their T&Cs are. However, it is in their assessment of commission arrangements where the outcomes are least clear.
We know from the FCA’s March interim report that there were concerns about the impact of some commission arrangements on consumers. Given the FCA’s TCF mandate, finance companies have been working with dealers to address these concerns.
We can be sure that there will need to be greater management information around the financing processes to assess customer outcomes. Any identified ‘high risk’ arrangements such as; incentive bias between products; inappropriate incentives for the sale of additional products and escalator incentive thresholds, look set for change and it is evident looking across the market that some of these changes are already happening. However, the simple truth is we don’t yet know precisely what changes will occur, but some will.
For our dealer clients, I know this creates uncertainty, but looking around in what has always been a highly dynamic market, such uncertainty is a daily reality for us all and undoubtedly will continue to be the case.
The way forward has to be centred upon creating a resilient culture. This is about good people, both internally and externally, committed to a collaborative ethos and ready to handle change positively. So if you need help, you can rely upon us to be there.