The plan is to introduce a 14-day ‘cooling off’ period, following the sale of finance.
This, said the RMI’s Sue Robinson, ‘could make it very difficult for car dealers to sell these products to their customers, and lead to consumers leaving themselves unprotected in the event of an inability to repay a loan.’
Blame the Competition Commission. It wants to drive through the changes, to address concerns that consumers are deterred from shopping around for PPI.
The sale of PPI won’t be possible until two weeks after the financial product has been sold.
However, says Robinson the proposal will leave both car dealers and their customers worse off. ‘If this proposal is implemented, it will mean that dealers will find it extremely difficult to sell these products.
‘Consumers will, in many cases, forget to follow up, and are likely to be left unprotected. In the current economic climate, where many consumers are concerned about the possibility of redundancy, PPI is a crucial way of ensuring they are able, if the necessity arises, to cover their loan payment.’
It could even affect new car sales. Without the reassurance that they’ll be able to repay loans, Robinson feels that the worst-case scenario could see customers desert showrooms.
The move could also have an impact on consumer interest in cars: ‘Unless customers feel they are able to repay loans even in the worst circumstances, they are unlikely to return to showrooms,’ said Robinson.
Fewer sales of PPI, she adds, means less protection for defaulting consumers for finance houses. And this means they could seek other ways of protecting their debt.
How? Through ‘tighter lending criteria and higher APR rates, both of which would be to the detriment of the consumer.’
In short, reckons the NFDA, it’s bad news. And will be lobbying the Competition Commission to say so.