UK Motor Finance businesses are moving quickly to assess the real impact of the FCA “Final Findings” document, released earlier today.
Stephen Dawson, head of Shoosmiths’ Financial Services sector group, comments: “Perhaps unsurprisingly, the core themes highlighted by the FCA as troublesome are around (i) commissions (ii) sufficient, timely and transparent information, (iii) affordability assessments, with lender controls being pervasive across each of those areas.
“We have seen a lot of work going in across the industry, including lenders and brokers, to address many of the issues raised in the Final Findings.”
Dawson notes that the report contains some comparatively stark language about the state of the lender and broker motor finance industry in respect of these three key areas. The FCA talks about issues at a “potentially significant scale” and recommending “change across the market to identify the potential harm that we [the FCA] has identified”. Policy intervention appears to be a virtual certainty.
“Our own view is that the market has moved very far in the last 12 – 18 months, and a lot of work is ongoing,” Dawson comments. “It is disappointing that the lenders who have responded positively to FCA guidance, and new rules, find that the market is being led towards much stricter governance because of a broader failure in parts of the market.”
The report also supports ongoing FCA work in the field of financial promotions re-emphasising the need for communications to be clear fair and not misleading. And raises the debate as to what “in good time” really means for the purposes of pre-contract information disclosure.
Warns Dawson: “In the immediate aftermath of the report coming out, it is perhaps worth motor finance businesses taking careful note of the issues identified, and deciding which of the issues are directly relevant to your business. Speak to your advisors, and particularly those ones who have a broad view of the market (including lender and broker activity).”