Financial services
regulator tells FSA conference product is ‘not high risk’ and does
not pose same problem as PPI. Fred Crawley
reports.
Go deeper with GlobalData
GAP insurance is set to
remain a growing product in the retail motor finance market, as the
FSA has tentatively taken the view that the product does not
present the same level of risk to consumers as payment protection
insurance (PPI).
Addressing delegates at this
year’s FLA motor finance convention, which took place at Gaydon’s
heritage motor centre on 10 November, FSA senior associate Derek
Smee said GAP insurance was not considered “a high-risk product” by
the regulator.
“We have no plans to do
specific work on GAP,” he said, before adding GAP was “on the
radar” of the FSA as an increasing number of motor retailers were
selling the product set.
“The GAP market is growing,
and if you are advising on selling these products, the relevant
systems and controls must be in place,” Smee added.
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By GlobalData“Customers need to fully
understand the product, and it can’t be presented as compulsory to
a finance agreement.”
Meanwhile, Smee said, PPI
would continue to be a major focus for the FSA, despite the fact
the regulator was “aware” that most problems involving mis-selling
of the product were occurring in other areas of the financial
services sector besides motor finance.
“We are reviewing our
handling of complaints with this in mind,” he said.
A delegate at the convention
asked Smee whether the fact that nine out of 10 PPI mis-selling
complaints were being upheld by the Financial Ombudsman Service
(FOS) had “rung any alarm bells” at the FSA.
Smee replied: “There is a bit
of frustration from us over how the FOS is dealing with complaints.
I hear what you are saying.”
‘Anecdotal
evidence’
FLA director general Stephen
Sklaroff said he had received “anecdotal evidence” from association
members that the balance between upheld and rejected complaints at
the FOS had begun to shift towards “greater fairness” for FLA
members in recent months.
He added the FLA was pressing
the new management at the FOS to “improve understanding” of motor
finance providers, and had conducted a successful seminar with the
service on this topic.
Nevertheless, Smee advised
delegates receiving PPI complaints from claims management companies
to investigate them thoroughly regardless of their source, despite
the fact the FOS found many such complaints to contain insufficient
supporting information.
The FSA will be split up by
2012, at which point its responsibilities will be split between
future agencies the Prudential Regulatory Authority (PRA) and the
Consumer Protection and Markets Agency (CPMA).
According to Stephen Dawson,
partner at law firm Arthur Cox: “We can expect this regulator
[CPMA] to take a more proactive and interventionist attitude to
retail finance.”
Despite the CPMA still being
more than a year away, the shape of things to come may already be
becoming apparent.
The coalition government has
started a review of the consumer market, as part of which it has
proposed “a regulator” be given the power to cap interest rates on
store cards and other consumer finance products.
While the idea has not yet
been applied to the motor finance sector, Sklaroff feels that, if
it is not discussed thoroughly now, this ‘unhelpful’ idea could
spread.
“If it takes root anywhere in
the sector, you can bet we will be seeing more of it eventually,”
Sklaroff warned.
There have been signs the
government may be more receptive to industry lobbying than its
predecessor, however. In recent months, the FLA has successfully
lobbied to have voluntary termination (VT) provisions
repealed.
Minister for consumer affairs Edward Davey was reported to
have acknowledged VT provisions as “old-fashioned”, and to have
agreed provisionally to proposing it for repeal.
