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It could be assumed the FCA will pick on the “big players” as that will have the desired impact if they need to hand out any enforcement notices for noncompliance.

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The FCA are planning to conduct a point of sale mystery shop exercise in September 2021 to measure lenders’ control over their dealer network to ensure dealers comply with the regulatory requirements in relation to motor finance commission models and commission disclosure.

It could be assumed the FCA will pick on the “big players” as that will have the desired impact if they need to hand out any enforcement notices for noncompliance. Now, you could be one of the lucky ones and not be “mystery shopped”, but do you want to run that risk? Any reputable lender would have been in contact with their dealer network to ensure compliance. However, we live in the real world and during these “unprecedented times” that we live in, it may be a good idea to ensure that you, as a motor trader, are fully up to speed.

We are certain the lenders will be primed and ready for any challenge they receive from the FCA and, dare we say, attempt to “pass the buck” back to their dealer network.

Question“How many times have you received support from the lender when a consumer wants to reject a vehicle for unsatisfactory quality?” No need to share your answers! With that in mind, would it not be prudent to contact your lending partners for any clarification you require? At the very least, you can evidence you have been proactive in this space and have asked for support from your lender with regards to your regulatory responsibilities.  With the FCA’s guidance and rules not always being an “easy read”, your lender sending out a couple of emails regarding commission models and disclosure changes back in January 2021, when the rules came into force, is probably not sufficient to ensure your compliance.

In a previous update, I mentioned “the lender has a responsibility” and therefore cannot just blame their dealers for not complying with FCA regulations.

Areas for consideration:

  • Are you “prominently” disclosing the existence and nature of all commission arrangements that you have with the lender when arranging finance for your customers?
  • Does your website have a suitable commission disclosure statement?

The FCA’s objective is for consumer protection: “consumers get a fair deal and to secure an appropriate degree of protection for consumers.” Therefore, there is the potential for a breach of one of the FCA’s Principles for Businesses PRIN 6 Customers’ Interests – “A firm must pay due regard to the interests of its customers and treat them fairly.” This means the manner you deal with your customers will also be under scrutiny if you have a mystery shop visit.

If you are unsure or need assistance in relation to FCA compliance, please do not hesitate to contact us.

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John McDougallLegal AdvisorRead More by this author

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While We Wait: Preparing for the FCA’s Review on Motor Finance Commissions

As anticipated, the FCA was not particularly helpful when questioned about the various issues of investigating complaints that were outside of the standard retention periods for documentation.

FCA Commission Review: Separating fact from fiction in the wake of scaremongering

Attend a complimentary seminar hosted by the FCA for first-hand information – Scheduled for Wednesday, 24 January 2024.

The FOS reports over 10,000 motor finance complaints: Are we really surprised?

The good news currently is the FCA is focussing its attention on the lender and not our members.

The FCA means business

The FCA are closely monitoring how firms are putting their new rules in place and will take action against those that aren’t following them.

Financial promotion on social media

The FCA’s supervisory approach to financial promotions in social media was issued in 2015.

Another victory, but the problem has still not gone away!

The FOS confirmed in the article they had not yet published any final decisions on commission-related complaints.

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