Consultant Zone

Motor finance challenges

This is not the first time car finance arrangements have been the subject of one of our updates.  Less than 6 months ago we said, “three motor finance firms are facing a class action in respect of overcharging…..the excessive interest claims are eye-wateringly large and if Courts follow the PPI ‘Plevin’ precedent, many more firms will be targeted with similar claims.”  Judging by the FCA’s most recent market intervention, its patience with the car finance industry has clearly run very thin.

The FCA has been proactive in the motor finance sector for several years; let’s not forget the warning shot it fired at the industry in its 2017/2018 business plan and later when it launched a motor finance market review. It banned discretionary commission arrangements, removing incentives for brokers to increase the interest rate that a customer pays for their motor finance to enhance commission. The FCA also asked firms to review their practices and, where harm was identified, to address the harm. Clearly such reviews have either not happened or have been ineffective, otherwise there would be no need for the regulator to use its powers to review historical motor finance commission arrangements and sales processes across several firms.

If firms had complied with the early FCA warnings, there would not have been a high number of complaints from customers claiming compensation for commission arrangements prior to the ban. Firms would also not be rejecting most complaints because they consider that they have not acted unfairly, when clearly they did. And FOS would not be finding against firms, which they are.

In our decade and a half history we have helped numerous firms in many regulated (and unregulated) sectors raise standards in their complaint handling procedures. We regularly work with firms to re-build root cause analysis processes, design systems to help them learn from previous FOS decisions, review treating customers fairly (and now Consumer Duty) policies and undertake culture audits. We have also collaborated with several firms to improve their corporate governance, and second/third lines of defence.

Regulated sectors cannot continue getting it wrong. Get in touch to learn how we can help raise standards in governance, risk and compliance.