Miscalculated mileage on finance products and non-maintained contracts could provide claims companies with their next target once the PPI window closes, warned Andrew Smith, managing director of consumer finance experts Consumer Credit Advisory Services.
Smith will explore how the Financial Conduct Authority’s (FCA) ‘treating customers fairly’ or TCF remit can be delivered in practice and how those procedures can relate directly to some of the regulator’s 11 principles when he takes to the stage at AM’s F&I Compliance Conference on November 10, at the National Motorcycle Museum, Coventry (B92 0ED).
Dealers should be concerned with how the mileage is determined for motorists funding their vehicles with personal contract hire or PCH products where lower mileage results in a lower monthly payment.
Without evidence that the sales advisor has paid due attention to discussing the customer’s mileage requirements, it may pose a risk of a claim for compensation at some point in the future.
The same is possible for personal contract purchase or PCP plans where the motorist wishes to hand back the car at the end of the term only to find the value has depreciated due to excess mileage.
Drivers could also potentially make a claim if they said they were not offered a maintenance contract as part of their funding package which turns out to cost substantially less than forking out for service, repairs and the MOT (if applicable) over the term of the agreement.
Smith commented: “From the start of the finance application, dealers need to evidence affordability and demands and needs, and be able to prove the customer understood the penalties for excess mileage and what to do should their driving behaviour change.
Should a complaint arise and be referred to the Financial Ombudsman Service (FOS) it is highly likely they will rule in favour of the customer without supporting documentation to evidence that these were all covered and understood fully.
“There is definitely a lack of understanding among dealers as to what the FCA would expect to see as evidence as well as the level of scrutiny to which they could be subjected.
“The regulator has one more sector (pawnbrokers) to begin authorising in the first quarter of next year after which they will revisit certain areas which they think require more investigation and motor finance is almost certain to come under the microscope.
"The safest route is to set the bar extremely high and the most important aspect is to be able to evidence everything.”
Smith added a further word of warning as the closure of the window to make PPI claims is likely to be announced next year: “Claim management companies are making lots of money from PPI but they are aware this now has a short shelf life and they are looking around for the next big thing.
"They thought it would be GAP, but the cost of the product is too low so it wasn’t profitable enough, but excess mileage disputes and whether a motorist was offered a maintained contract are already in their sights. I have received calls from claims companies asking to discuss maintenance contracts and excess mileage which I have refused to take, but it proves they are looking at these areas and we should be on our guard.”
Tickets
Tickets are available to dealers and manufacturers, to book please visit http://am-fandi-compliance.am-online.com/ or contact Nicola Baxter on 01733 468289, email nicola.baxter@bauermedia.co.uk.
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Maloclm Hill - 09/11/2015 20:23
As one of the originators of the PCP product with Persdonal Contract in the mid 1980's and the successful Solutions product I launched in 1993 I think that the onus is on the customer to confirm their mileage in any contract and this is not the responsibility of the sales advisor.The customer has the opportunity of checking th facts in the contarct and just like Motor Insurance has the opportunity of changing any element of the contract that they did not agree with. The customer of course has the advantage of confirming a lower mileage in order to reduce the monthly payments but this is at their risk as obviously they will have to pay any penalty for exceeding the mileage which is clearly shown on the agreement and of course this is only implemented if the customer opts to return the vehicle and does not either settle the agreement or use any equity in the vehicle against a further purchase. In my opinion this threat of claim companies using the under mileage as a claim against a dealer or a finance company y will be very difficult and certainly will fail if they try to use a blanket approach as they have achieved in PPP claims. Mileage for Contract Hire which is s similar product has been around for many years I myself was involved in this product in the 1970's and it is similar to PCP with the exception that vehicle ownership is not the same but the end of contract mileage penalties are similar and yet nobody has complained about this product which has been in the market place for at least 40 years