The two-way street of auditing

Joint working and sharing best practice with business partners leads to higher levels of trust, solid relationships and most importantly good performance and treatment of mutual customers.

The two-way street of auditing

Across the motor finance sector, businesses have always (to varying degrees) conducted audits both of themselves, and of those operating alongside them. There is nothing new in firms seeking to make sure they are doing things right and extending that to satisfying themselves to the conduct of their trusted partners.

Those with a keen eye on the Financial Conduct Authority’s (FCA) Consumer Credit Handbook (CONC) will know that taking reasonable steps to ensure people acting on a firm’s behalf do so in a compliant manner.

With this as our starting point, we ask ourselves what is reasonable? How should we check on our business partners?

We can say, with certainty, that lenders cannot just rely on the fact that the dealers and brokers they accept applications from are FCA authorised in their own right. Fortunately, most lenders would not seek to rely on this.

But the question is, should lenders better audit their dealers and brokers? The answer must be both yes and no.

At DSG Financial Services we have access to the full range of motor finance lenders and see the varying degrees into which we are audited by those lenders. Some take a very much hands-on approach with regular visits to scrutinise our polices and processes. At the other end of the spectrum, some do much less, and dare I say it, anything at all.

What is a better audit?

If a lender has a relationship with a broker or dealer with a proven track record of good conduct and robust policy and process, then better auditing must mean less auditing.

Similarly, for those without evidence of high quality performance under their belts, the firm minded to audit would need to do so regularly and to a more in-depth degree in order to build confidence and trust. Surely this approach is common sense, but the discussion should not stop there. It must also be the case that what constitutes better auditing is not limited to the frequency of the activities undertaken.

Current areas of regulatory interest should also be included as part of an audit. For example, the question of how firms are currently handling customer data and preparing for the significant changes coming with the impending General Data Protection Regulation (GDPR) must be on the agenda. In short, an audit programme is an evolving entity not a “set in stone” checklist.

The real benefit and the ultimate ‘better audit’ will involve a two-way process between lender and broker/dealer.

Speaking from our own experience, we have certainly learned from knowledgeable lender based colleagues offering advice on new ways of thinking, with regards to the rigorous requirements of the regulatory landscape. But equally, lenders can, and have, learnt from us with similar idea sharing and discussion around complex regulatory demands.

Joint working and sharing best practice with business partners leads to higher levels of trust, solid relationships and most importantly good performance and treatment of mutual customers.

It’s integral the industry is open to meaningful and productive scrutiny from its peers – providing it is a two-way street and not audit for audit’s sake.