The National Franchised Dealers Association (NFDA) has held a positive and constructive meeting with the Financial Conduct Authority (FCA) following the publication of their findings on motor finance.

As part of their enquiry into motor finance, the FCA mystery shopped 122 firms to analyse how information is being given to customers in the showroom. There was a broad spectrum of firms including franchise retailers, independent used car dealers, car supermarkets, and online car sellers. The choice of firms meant there was a particular focus on near and sub-prime lending.

The mystery shopping exercise gave very mixed results. Overall, lack of explanation of the product, including APRs, were cited as the main issue.

Generally, the FCA has confirmed that franchised dealers are not the main cause of the problem. In fact, it was noted that a lot of effort and investment had gone into the showroom process and training of staff. Overall, the biggest issues were apparent with independent used car dealers and this gave the FCA the biggest concern.

The FCA will be examining more in depth a number of issues found during their enquiry. This will include not only customer information, but also more details on commissions. The FCA is particularly concerned that dealers are able to influence commissions paid to them by flexing APRs charged to customers. They are also concerned with the fact that consumers are not receiving clear enough information early enough in the sales process. This includes the existence of commissions. To address this issue, FCA admitted that they will be further analysing commission models to better understand them.

The FCA has a statutory obligation to consult on any rule changes, with consultation periods lasting between four and twelve weeks. They are currently carrying out a pilot exercise to collect data from 20 lenders and 50 brokers to form part of a Cost Benefit Analysis ahead of a consultation. The full exercise will take place during late April and May. The consultation period for any rule changes will take place towards the end of the year and be followed by a period of feedback review.

Going forward, the FCA has shown keenness to work with us and our franchised dealer members. This will happen after their latest research, once they are into the consultation period.

NFDA will continue to liaise with the FCA and we will keep you informed.

If you have any questions on this issue, please contact