Car dealers face random spot checks from the FCA as it steps up mystery shopping to check on those selling finance.
Experts have warned that dealers that fall foul of the checks for relatively minor infringements could then find themselves subject to far more thorough investigations.
Following the FCA’s ban on discretionary commission, the city watchdog said it will carry out ‘point-of-sale mystery shop exercises to measure lenders’ control over dealer networks’.
Trevor Johnson, head of business at Automotive Compliance, said if a car dealer failed a mystery shop it could ‘kill a business’ and that all dealers should be confident their selling procedures will stand up to scrutiny.
Paul Guy, Automotive Compliance director, told Car Dealer an investigation could ‘open up a can of worms’ and warned dealers to ensure their staff are giving customers robust information.
He said: ‘In previous mystery shop exercises the FCA has reviewed whether the advisers give customers correct and up to date documents and also assessed whether the contents of conversations were clear, fair and not misleading.
‘The concern for dealers would be that should the mystery shop highlight an area of concern in one particular area, the FCA is then duty bound to act upon this and review.
‘Having been present at these types of reviews, it is like opening a can of worms, off in all directions and you can’t put the lid back on.’
Guy advises dealers to ensure their FCA processes are up to date and that staff are following the procedure every time.
He added: ‘The last thing a dealer needs is for it not to happen on a mystery shop.
‘If you have a process that relies on everything being done at handover, obviously this is not the correct procedure anyway, and this is not going to work as I’ve never seen a mystery shopper get to handover before.’
Other important things to check include ensuring the finance commission disclosure is up to date, reviewing customer documents, making sure initial disclosure documentation is up to date and the disclosed panel of lenders current.
Guy said: ‘I would suggest reminding your sales advisors what their regulatory responsibilities are and retain evidence of these sessions.
‘Make sure your staff accreditation and training records are up to date – you will be asked the question later and don’t say a bloke from the finance company comes and does a bit with the guys).’