Andrew Bailey, chief executive officer at the Financial Conduct Authority (FCA), has said the regulator intends to publish an update on the expected exploratory review into motor finance in March.

Speaking at the Finance & Leasing Association’s (FLA) annual dinner last night, Bailey told delegates he recognised the logic behind PCP.

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He said: “The majority of new car finance is now in the form of Personal Contract Purchase (PCPs), with which many FLA members are very familiar. Use of PCPs has grown rapidly in recent years. But, as I have said before, the shift to PCP based lending to finance cars recognises the nature of a car as an asset, with consumers more comfortable leasing or renting than owning outright. There is a logic to this.”

This mirrored roughly what he had told papers before, including calling PCP not bad, ‘per se’ and ‘not irrational at all’

That said, Bailey noted the FCA was looking carefully at a number of possible conduct approaches by lenders. Specifically, it was looking at:

  • Are firms taking the right steps to ensure that they lend responsibly, in particular by appropriately assessing whether potential customers can afford the product in question?
  • Are there conflicts of interest arising from commission arrangements between lenders and dealers, and if so are these appropriately managed to avoid harm to consumers?
  • Is the information provided to potential customers by firms sufficiently clear and transparent, so that they can understand the risks involved and make informed decisions?
  • Are firms managing the risk that asset valuations could fall and ensuring that they are adequately pricing risk?

These points mirror the key questions the FCA highlighted in an update it gave on the progress of its review in July last year.

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A full transcript of the speech can be found in the blog section.