The publication of the FCA’s final findings on motor finance has raised alarm bells across the industry this week. Their research shows that some consumers have been overcharged by more than £1000 when taking out loans to buy cars. The FCA has suggested that a key problem is commission models which allow brokers to set customer’s interest rates in order to earn higher commission for themselves. This is especially prevalent in Personal Contract Purchases, which now make up roughly 80% of all new car finance deals, and see the customer renting their car over three or four years.
The Finance and Leasing Association claims that the FCA’s final findings on motor finance are “based largely on out-of-date information” and don’t reflect “the very considerable progress that the market has already made in moving away” from these problematic commission models, but have also said that they “look forward to working with the FCA as it modernises its regulations”. The FCA is still considering options for intervening in the motor finance market, with the possibility of strengthening current rules, banning commission models that are open to abuse and limiting broker discretion in regards to setting interest rates all being discussed at the moment.
At Kind’s own Motor Finance roundtable in December 2018, the oversight of brokers and dealers was a central topic throughout discussions. We’re now looking forward to deliberating over the final findings at our next event, which will be held in April.
Given the wide scope of the key areas involved (oversight of dealers and brokers, affordability assessments, policies/procedures/systems & controls, clear and not misleading information) all firms will need to review their current practices. A good way to start would be by way of a gap analysis and Kind Consultancy have experienced motor finance consults who will be able to support you in the initial stages and beyond. Contact Selena Tye on 01216432100 or e-mail firstname.lastname@example.org for a confidential discussion of your organisation’s needs and how we can help.