MOTOR finance companies need to be working now with vehicle retailers and technology providers to create uniformity across all channels through which their products are sold in line with new FCA regulations.
Online motor retail specialist iVendi said that many appear to be concentrating on ensuring the compliance of their own captive showroom systems without confirming that third party platforms and other routes to market also meet requirements.
Chief Executive James Tew said: “Key among the FCA changes are the banning of discretionary commission and the question of how the existence of commission is presented to the consumer in the future. Because so many physical and online channels are used by motor finance companies and their intermediaries, this creates something of a challenge.
“Certainly, from our point of view, as a provider of technology that is used every week for generating and processing thousands of motor finance applications online and also in the showroom, we are very much aware that everyone needs to be working together to reduce the impact and business disruption in this area, right now.
“The January deadline is only a few months away and more uniform processes and disclosures may prove to be a much more difficult task than first imagined. Lenders have different commission models across their product ranges and as such the ‘nature’ of these, to use an FCA term, needs to be disclosed against each of them.
“Also, increasing the prominence of the availability of commission will most likely require changes to the online finance journey presented by retailers using products such as ours and ensuring that everything is compliant on the day the regulations come into effect is very much a priority for us.”
Tew said that there remained grey areas that needed to be resolved in how the FCA regulations would be operated by motor finance companies.
“This especially applies to the ‘nature’ of commission disclosed. There is some debate over exactly how this should be interpreted. The finance companies with which we are in dialogue often have different views. As virtually every dealer works with multiple lenders, this needs to be managed by both dealers and system providers to cater for their digital and analogue processes. Of course, there can be more than one interpretation but each needs to be justifiable.
“With each lender operating multiple commission models against their range of products and retailers working with multiple lenders, there’s certainly going to be plenty of housekeeping of this type that needs to be addressed. It is a question of coming together to arrive at forms of wording that are honest and compliant, and can be easily understood by motor finance customers.”
Tew added the forthcoming changes to commission had been clearly signposted by the FCA and iVendi has already built many of the new requirements into its platform.
“We’ve been looking closely for a while at how our own products will operate within the new regulations and we believe that, whatever route dealers choose towards meeting the new regulations, we can now align our systems to match.
“Because we are FCA authorised ourselves, we are able to bring a high degree of insight to the whole issue. Our fundamental approach is to ensure the customer is placed at the centre of the entire process, with a high level of transparency and information provided, to meet the general TCF principles in letter and spirit.”
