28 October 2013

There’s going to be a lot of attention in the coming months on the way the incoming Financial Conduct Authority handles the regime for consumer credit.

This is a complex subject mainly because, as yet, we don’t know exactly what approach the FCA will take when it becomes the industry ‘watchdog’ from next April, taking over from the Office of Fair Trading.

Interim registration with the FCA so that you can still sell finance products is simple enough – even if it does involve extra cost and paperwork.

However, early indications are that the most interesting aspect to consider is how any regulation changes will affect your customers.

At one extreme, it could be that finance on a car is treated in the same way as payday loans. Retailers might have to check upfront that customers could afford the repayments.

In other words, you’d have to ask them how much they earn and what their outgoings are – going into substantially more detail than you would for just a credit check. Now I can’t see any customer giving that information (accurately) to a car salesman – if for no other reason than they’d worry that the dealer might use it to up-sell them into a more expensive car.

Possibly the best advice I’ve heard so far is for retailers to read the current proposals and give their submissions to the FCA, so that the body can better understand the car retail process.

It’s either that or leave everything to chance and deal with the consequences.

Tristan Young

Tags: Car Finance, consumer credit, finance, Finance Conduct Authority, loans, pay-day, selling