The news that the Financial Conduct Authority (FCA) are planning to investigate the UK’s motor finance market will come as no surprise to those following the national and automotive press. In its business plan for 2017/2018, the FCA indicated concern over ‘irresponsible lending’ in the sector. Fueled by the sector’s growth and the huge rise in PCP agreements being sold to consumers, the regulator will be keen to avoid a situation akin to the PPI miss-selling scandal of recent years.
When IMI Magazine approached Dealflo for its thoughts on PCPs, and whether the industry had a case to answer, Dealflo’s CEO Abe Smith shared some thoughts on how lenders can ensure PCPs are being sold fairly and responsibly. The full article, published in the June 2017 issue of IMI can be found here, but an extract of Abe’s advice is below.
“PCPs are an important part of the car buying process today. They have helped customers maximise their cash ﬂow and establish a ﬁrm foundation for long-term relationships that help retention. The PCP model is certainly sustainable if it is the right product for the consumer and sold fairly.
Central to developing a sustainable model that satisﬁes regulators that PCPs are being sold fairly will be evidence – including a full audit trail showing exactly what the customer did and saw during the agreement process. In part, it was this lack of compelling evidence that made PPI so toxic. On the other hand, a demonstrably compliant process will protect both the buyer and seller. It seems inevitable, considering the FCA review, that motor ﬁnance must follow a similar path.”
Concluding the article, IMI editor Tim Kiek states that ‘the current evidence-based audit system is simply not sufficient proof that the customer has completely understood what they are signing up to’, casting considerable doubt on the enforceability of a fragmented semi-automated agreement process.
It is clear that an end-to-end evidence-based approach to finance in the showroom – one that supports the sale of the right product to the right people in the right way – would be beneficial to all parties (consumer, dealer and finance provider). It will easily meet any regulatory requirements that the FCA implements and see a bright future for PCPs in dealer showrooms across the UK.
You can read the full article here.