Even before the economic downturn, FSA regulation has forced dealers to become accredited before selling these products in the showroom.
Pressure is mounting on employers to ensure staff are kept up to date, with fines being likely for those that don’t.
The Consumer Credit Act 1974 introduced a system of licensing for companies selling finance.
The legislation is aimed at protecting individuals borrowing up to £25,000, with appeals to be made to the Office of Fair Trading (OFT).
It also changed the rules on voluntary terminations, allowing buyers to hand back a vehicle bought on hire purchase and walk away from the deal, providing 50% of the value had been paid off.
The ruling was aimed at ensuring consumers were not trapped in bad deals.
But for motor finance, this could leave the finance company paying the remaining value of a vehicle which had depreciated to less than the amount paid off already.
The costs of voluntary terminations are substantial, estimated to be between £83 million and £91 million of a market worth £9.4 billion.
In 2003 the Finance and Leasing Authority (FLA) claimed the act was outdated and in need of a review.
After a three-year process, the law was updated with the Consumer Credit Act 2006 which came into force on April 6.
Aimed at creating a fairer, clearer and more competitive market for finance, this brings new legislation that will affect dealers.
The first changes in April 2007 introduced a financial ombudsman service as a first port of call for consumer complaints and tightened breaches of the 1974 act through incomplete documents.
But it is the second part of the legislation, which came into force last month, that will bring the biggest changes for motor finance.
Whereas the original act covered credit for purchases of up to £25,000, the 2006 amendment removes this restriction for all loans except those for businesses.
As a result, all credit transactions, including those over the original threshold, will now be regulated by the act.
#AM_ART_SPLIT# The OFT has also introduced new unfair relationship tests, which can allow consumers to challenge the terms of their credit agreement.
The changes put added pressure on financial companies, already feeling the squeeze of uncertain economy, particularly in the specialist and executive car market, where the removal of the £25,000 limit places the companies at greater risk of exposure to voluntary terminations.
Peter Cottle, head of strategic accounts at Bank of Scotland Dealer Finance, says: “Lenders will have to be more mindful of what they write.
It won’t change the products but they will have to assess large value cars on an individual basis.”
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