For 10 years now, PCP has been the most utilised form of car finance by value.
This has been good news for new car sales but financial regulators are now getting jittery about the entire thing as they also are about the numerous long term 0% credit card deals which just keep on coming. The fear of course is that people are borrowing beyond their means as credit seems to be back in the pre 2008 ‘easy to get’ territory, and we all know where that and sub-prime lending landed the economy.
Seemingly expecting the worse, a Director at the Financial Conduct Authority (FCA) recently set out plans to extend the FCA Accountability Regime which is designed to ensure that individuals, as well as firms, are accountable for the way that they conduct themselves. The FCA will be consulting in the summer over their plans which could see not just senior managers, but individual employees being held to account for their conduct. PCP got its own mention in the speech and so dealerships will need to keep an eye on what extra rules and responsibilities may come their way.
The FCA will no doubt want to look at affordability and whether a credit check for credit worthiness is a good enough mechanism to ensure the consumer can really afford the repayments. In addition, the FCA have concerns about consumer choice and whether consumers are made aware of how much more they may be paying over the long term by taking PCP and not the more traditional HP which, is probably unaffordable for many of those taking advantage of PCP.
We did warn some months back that dealers will need to be on top of their PCP processes now that Claims Management Companies will be looking for fresh blood as PPI complaints are finally coming to an end. This new focus from the FCA will no doubt be more food for thought for those Claims Management Companies whose revenue and profits will dwindle with the demise of PPI complaints. Finance companies and dealers must therefore keep one step ahead.