The Financial Conduct Authority has updated attendees at an FLA annual dinner this week advising that an update on its review into motor finance is expected to be published in March.
Andrew Bailey, CEO at the FCA, advised guests at this event that they are “looking carefully” at the way lenders behave in selling PCPs, as part of their scrutiny of the motor finance market.
It was also reaffirmed that the FCA is looking at whether firms are taking the right steps to ensure that they lend responsibly, appropriately assessing whether potential customers can afford the product in question. Potential conflicts of interest arising from commission arrangements between lenders and dealers and if these are being appropriately managed to avoid harm to consumers is also a key area of focus for the review.
The FCA’s primary concern is transparency and whether the information that is provided to potential customers by firms is sufficiently clear and transparent, so customers can understand the risks involved and make informed decisions about finance. There is also concern about whether firms are managing the risk that asset valuations could fall and that they are adequately pricing risk taking this into account.
Jackie Crookes, Compliance Manager at FISC comments “In line with other reviews which have been conducted by the FCA since it took over regulation of the consumer credit market in 2014, it is widely expected that affordability assessment will feature as a key area for improvement / focus in the FCA’s anticipated feedback on the motor finance industry. Growing levels of debt, particularly amongst the younger generation, have led the FCA to the conclusion that poor affordability assessment may be pushing up levels of unaffordable debt. Inappropriate affordability assessment has led to debts having to be written off and / or exercising of considerable forbearance in other consumer credit sectors. Firms should be looking at their business models and assessing whether they are leading to positive outcomes for customers at all times.”
FCA Finance Tracker has been designed to assist firms in mitigating the risks involved in lending to consumers and in evidencing the provision of clear information to customers, presenting the risks associated with the various finance products offered to the customer. If you would like to arrange a demonstration of FCA Finance Tracker system, please contact FISC and we will be happy to show you the protections that can be made available to your business.