Dealers are being warned to make sure their technology can keep up with the new FCA regulations on commission.
As reported by Car Dealer, the Financial Conduct Authority is to ban the discretionary commission model on motor finance, which the regulator said had created an incentive to sell more expensive credit to some customers.
Online motor retail specialist iVendi said today (Aug 19) the changes, which come into force next January, could create danger areas for online systems.
Potential points of weakness include ensuring that the entire customer journey is recorded in detail by the platform in a way that can be audited in case of a future challenge, as well as the greater requirement to let the customer know about commission on every transaction and how it’s earned.
Technology also needed to be monitored over the wider changes that dealers were making to handle the new regulations.
Chief executive James Tew said: ‘One development we are seeing is a greater use of fixed APR products in order to circumvent the commission question, but this can create problems across your panel as a whole.
‘What your technology really needs to do is show the APR for each individual lender with which you work, so that if the primary lender declines an application, the customer can move on to the second choice.
‘In relation to this, the dealership also needs to be able to easily control the representative example within its digital finance promotions and include an audit trail to see who makes changes and when.’
He added: ‘We are also seeing new, risk-based motor finance products coming to market in increasing numbers and are expecting to see wider adoption of these over time.
‘These are designed to help the most creditworthy consumers get the best rate, but not all online and showroom solutions can yet handle their complexities when it comes to quoting, and dealers clearly need to resolve this issue where it arises.
‘We’ve been looking closely for some time at how our own products will work within the new regulations, and we believe that whatever route dealers choose towards meeting the new regulations we can now align our systems to match.
‘Because we are FCA-authorised ourselves, we are able to bring a high degree of insight to the whole issue.
‘Our fundamental approach is to ensure the customer is placed at the centre of the entire process, with a high level of transparency and information provided, to meet the general Treating Customers Fairly principles in letter and spirit.’
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