FCA to review motor finance market
The motor finance industry is about to be put under the regulatory microscope, after The FCA revealed plans to conduct an exploratory piece.
The announcement was made in the FCA’s Business Plan. It said the reason for the exploratory review was due to a number of concerns it has over lending practises.
Specifically, the FCA said it was worried there may be a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance sector.
The exploratory piece will aim to identify who uses these products and assess the sales processes, whether the products cause harm and the due diligence that firms undertake before providing motor finance.
The regulator said it would assess whether and how to intervene in the market following the review.
Responding to this news, Adrian Dally, head of motor finance at the Finance & Leasing Association (FLA) commented: “The motor finance industry is committed to responsible lending and to high standards of customer service. We will continue to work closely with the Financial Conduct Authority to ensure they have a good understanding of this highly competitive and diverse market.”
As had been anticipated by much of the industry, the FCA also highlighted a concern around point of sale products, and specifically highlighted remuneration as an area it will be looking at.
The FCA said: “We are concerned that firms may impose inappropriate fees or costs on consumers or inappropriately sell credit at the point of entering into a transaction. We will explore whether the fees, charges or other costs paid by consumers are influenced by commission, or other remuneration, models operating between firms – such as lenders and brokers. We may also consider whether firms exploit a point of sale advantage to charge higher than normal fees, or to sell credit to consumers for purposes for which it may not be suitable.”