The Financial Conduct Authority (FCA) Business Plan published today states that the motor finance market grew 8.2% in the twelve months to April 2017 with new point-of-sale lending for car purchases totalling £32.6 billion in the twelve months to the end of Q1 2017.
The regulator’s recently published update explained that they want to identify whether consumers have sufficient, timely and transparent information when taking out motor finance.
The FCA said: “We are testing this in a number of ways, including through a mystery shopping exercise. We are undertaking further work on responsible lending, particularly the approach taken by motor finance lenders to assessing creditworthiness (including affordability).
“Our work will primarily focus on higher credit-risk consumers, but we will test how lenders assess affordability and whether current procedures are working in the interests of all consumers. We are also doing further work on commission arrangements.
“Some commission structures create a strong link between the dealer commission and the interest rate charged to consumers. We are therefore assessing whether lender controls and current regulatory requirements minimise the potential for harm to consumers.”
The FCA expect to complete their review of the motor finance market by the end 2018. At that stage, they intend to publish our findings, setting out any areas of concern they have identified and how they intend to tackle them.
Members can access the BVRLA factsheet Incentives and managing conflicts of interest, which has been produced to support FCA-regulated firms with compliance.