Consumer Duty rules require dealer focus on management information

Dealers must compile ‘accurate and timely’ management information (MI) in order to comply with the FCA’s new Consumer Duty responsibilities.

The rules state that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.

It also seeks to ensure products and services are sold at a fair price that reflects their value.

Rob Severs, senior VP product and insight at iVendi, said that proving customer needs were being put first could only be achieved by monitoring a number of essential metrics over the longer term.

He explained: “MI will play a key part in helping both lenders and retailers prove compliance and show continuous improvement when it comes to Consumer Duty. It provides the data and insight to help better understand how good vehicle buyer outcomes are being delivered and where improvements need to be made.”

The motor retail sector should track the volume of rejections, complaints, customer feedback and outcomes of sales reviews, according to Severs.

He said: “It’s a question of identifying the right metrics for your business and introducing processes that ensure they are accurately measured and regularly monitored, with clear lines of responsibility being created. Our advice is that dealers and lenders make a checklist to ensure that the MI they are compiling meets basic requirements.”

Dealers need to ensure they have a fair and transparent panel of lender products to offer to customers, showing compliant processes and value to the end consumer.

They will largely be reliant on IT system providers in both the showroom and digital space to provide data such as audit trails that capture and can demonstrate compliant selling across a panel of lenders; data on market finance rates to ensure dealer offerings remain competitive; and sufficient insight across all their lending partners to produce accurate representative examples.

For lenders, a key outcome of embracing Consumer Duty should be that applications from its target customer base increases while volumes of rejections decline - showing systems and intermediaries are introducing their products correctly.

Also, because they are classed as product manufacturers, lenders will rely on distributors to provide low level MI for each lender finance product including conversion rates at each stage of the customer journey; product suitability questionnaires to ensure target market conversion and filtration of non-target customers prior to application; data showing testing of consumer product understanding prior to application; accuracy metrics on any consumer soft search algorithms; for rate-for-risk products, MI on the rates initially offered to customers against those accepted by the customer; and activity logs showing introducer-declared showroom activities.

Severs added: “Tracking Consumer Duty MI could potentially be done manually but, as with any process of this kind, technology will deliver exponentially more effective results with greater accuracy and speed available in reporting formats that are easy to understand."

The implementation of the Consumer Duty Act into car retail operations was the subject of an AM webinar presented in partnership with Freeths solicitors. This can be viewed on-demand by clicking here.