Act now to adapt to FCA's motor finance regulation changes, opinion

Many car retailers will still need time to fully consider the content of the Financial Conduct Authority’s (FCA) final ruling from its motor review and the impending ban on discretionary commission models.

But as an industry, there is plenty we can do to begin implementing necessary changes, and start to look at how we, as lenders, incentivise F&I salespeople and brokers to act in customers’ best interests.

Given the need to make the changes in a relatively short amount of time, Alphera has already entered into detailed discussions with our partners on how we will collaborate to address the FCA’s requirements.

The FCA may have given our industry six months to implement, but dealers can treat the following points as priorities now:

• Make sure your salespeople understand the need to properly disclose the existence and nature of commission, and the need to do that early enough in the process. Don’t wait until 28 January 2021 to do this – it takes a long time to change processes.
• Continue to embrace digital sales, even though your physical dealership might now be open again. The adoption of e-retailing and e-sign platforms makes it easier to follow a compliant sales process and evidence that customers have received the appropriate information.
• Make sure your documentation is properly up-to-date and doesn’t simply bury disclosure statements in the adequate explanations documents or initial disclosure statements, which are held online but seldom read.
• If you haven’t already, talk to lenders about their remuneration schemes because those will need to change if there is currently any discretionary element around commission. Remember, these changes will take a number of months to bed in.
• Don’t forget the Senior Managers and Certification Regime (SMCR). Senior managers need to be fully informed as the FCA will expect them to be your front line. What are you doing to make sure senior managers have kept their knowledge of compliance up-to-date during lockdown?
• Consider enrolling employees in the IMI’s F&I Accreditation scheme as a means of ensuring salespeople ‘stay competent’. As an official training centre, Alphera will be updating its training that delivers this accreditation pathway – principally around commission disclosure requirements.

Making sure that sales processes follow new FCA requirements is a shared industry responsibility, and lenders need to take reasonable steps to make sure its agents remain compliant.

Over the coming months we will change our remuneration schemes where needed and we are already starting to amend our documents to increase the prominence of the existence of commission.

Dealers and brokers need to be able to evidence that they’ve had these conversations with customers as early as is practicable: whilst the rules on commission disclosure have not significantly changed, dealers clearly need to prove that disclosure has come early enough in the conversation for the customer to have time to reflect before being asked to commit.

Given the importance of these changes in process, and the time needed to prepare and implement, don’t leave it until the FCA’s January deadline to adapt.

Author: Spencer Halil, director, Alphera Financial services