With new regulator the
Financial Conduct Authority threatening to flex its muscles, Paul
Guy asks if more consumer focus is a bad thing for car
finance.
Go deeper with GlobalData
During early 2011 it was
widely speculated that the FSA was to be disbanded. What was not so
widely understood was that the new regulator, the Financial Conduct
Authority (FCA), would be taking control of regulation in the motor
industry by the end of 2012.
Back in March 2011, FSA chief executive Hector Sants, in
announcing the formation of the FCA, said: “The FCA will build upon
the FSA’s new proactive consumer protection strategy, launched in
March 2010… delivering intensive supervision of firms to ensure
they are treating customers fairly…
“It will focus on point of
sale practices, product manufacturing frameworks and firms’
governance and culture.”
In June last year, the FSA
published the document, The Financial Conduct Authority –
Approach to Regulation, supported by a number of roadshows
across the UK.
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By GlobalDataThe document set out how its
successor body, charged with conduct and market regulation, would
be tougher, bolder and more engaged with consumers.
Question is, do the dealers
under direct authorisation of the FSA understand the impact this
will have on their business when the new regulator, the FCA, starts
delivering their objectives?
As highlighted in a recent
edition of Motor Finance, there is also the inference that
“the government’s preferred option, according to the consultation
paper, is to transfer credit regulation from the Office of Fair
Trading to the FCA”.
In short, regulation, under
the FCA, is likely to become more intensive and consumer focused.
Is this a bad thing for the industry?
Dealers still have bad
memories of how the implementation and understanding of the FSA
process, when the FSA started regulating the motor industry in
January 2005, was a major upheaval to their businesses.
With the changes due in
regulation by the end of 2012, this will probably mean another
headache. The issue of how to keep pace of, and understand how, the
new regulations will be time consuming.
Marketplace
pressure
Bringing change to their
process and administration of delivering the new objectives of the
FCA in a climate where the focus will be on maintaining sales of
cars and motorcycles only adds to pressure in the
marketplace.
A consideration of both time
and cost efficiency will be to de-register from direct
authorisation and join a network whereby the dealership becomes an
appointed representative leaving the headache to your principal
firm who will then advise and implement changes required by any new
FCA process.
Dealers should, however, be
selective when choosing a compliance partner. Automotive Compliance
is the only motor-industry specific network that allows dealers to
choose their own product suppliers.
We are not tied to an
insurance provider or work in any other markets, which is why,
month-on-month, our network grows as independent businesses take
the appointed representative option.
Of major consideration, if
dealers apply to de-register from direct authorisation before 31
March they will avoid paying their annual fees for the following
year, but if they apply after this date, full annual fees will be
payable as there are no pro-rata arrangements or
refunds.
Working smarter and embracing
FSA regulation and compliance could bring so much more to a motor
dealer than just a piece of paper in a deal file with some boxes
ticked and a signature.
Our network highlights
clearly those dealers who have truly embraced compliance, creating
a genuine opportunity to offer their customers optional products
that would be beneficial to them and importantly that they qualify
for.
Avoiding
unpleasantness
The management of the process
ensures the advice procedure is carried out with every retail
customer fully complying with the latest FSA Insurance: Conduct
of Business Sourcebook and also demonstrating compliance with
the Treating Customers Fairly initiative, protecting their business
from any potential unpleasantness from the regulator.
From our dealers’ figures the
sale of additional products typically adds £400 per unit to the
bottom line of a deal, selling an average of two additional
products.
If predictions are correct
and we will see fewer footfalls in our showrooms in 2012,
maximising the profit opportunities we still have will be
essential. The cynical would say that with fewer customers we will
have more time to focus on the customer in front of us.
There are two approaches. You
can do only what you need to or you can embrace regulation and
maximise the profit opportunity.
You can ask your customer,
“Can you sign this? It’s for the authorities”, or tell them, “To
us, being regulated means it is our responsibility in line with the
principles of Treating Customers Fairly to give you the best and
correct advice possible in the purchase of your new
vehicle”.
Which one do you want to
be?
Paul Guy is managing
director at FSA Automotive and Automotive
Compliance
