Against the backdrop of significant growth in the uptake of consumer motor finance, the Financial Conduct Authority (FCA) announced in its Annual Business Plan its intention to look at the motor finance market. The FCA’s intended outcome from this work is to ‘ensure the appropriate degree of protection for consumers’.
In June 2017, the BVRLA established a Motor Finance Taskforce with the intention of developing a proactive industry response to the FCA’s work in this area, including developing an improvement programme offering a clear differentiator to the membership.
The Taskforce, initially comprising leasing broker members, is now expanding to include leasing members, who also have a vested interest in this area.
Between February and April 2016, the FCA carried out some quantitative research assessing creditworthiness including affordability in the consumer credit market, interviewing 70 firms from across 12 sectors. Motor finance providers accounted for 30% of all firms being interviewed (21 firms in total).
Last month the FCA published findings from the research which centred around policies and procedures with regards to affordability checks and decision making.
Although the FCA acknowledged that the sample size was ‘small and may not be representative of the market’ there were some alarming revelations including that 10% of firms offering motor finance claim to ‘never’ take the applicant’s income into account and only 43% consider an applicant’s expenditure.
Members have an opportunity to stand apart from others by becoming early-adopters of a consistent set of guidelines, policies and procedures produced by the BVRLA to help ensure responsible lending and to facilitate responsible borrowing.
As part of this work, BVRLA members are encouraged to embrace a culture of continuous improvement, monitoring outcomes and making changes where required to improve the customer experience.
The BVRLA will support members by developing a toolkit to proactively address the FCA’s concerns. This will deliver against the recommendations made by the Taskforce and will include:
1. a set of core policy templates to ensure responsible lending and to facilitate responsible borrowing.
a. Decision-making policy
b. Complaints and feedback policy
2. a set of core standard operating procedures to ensure responsible lending and to facilitate responsible borrowing.
a. Assessing creditworthiness
b. Assessing suitability
c. Monitoring customer satisfaction
d. Monitoring effective decision making
e. Monitoring staff training
3. guidance on what good communications looks like at the point of sale to ensure clarity and transparency with regards to costs and fees.
a. Digital communications
b. Printed communications
To find out more about the work of the Motor Finance Taskforce, or to request to join the group, please email BVRLA Legal and Policy Executive, Amanda Brandon.