Knowledge: If dealers choose to ignore FCA now it could cost them dear

Time 9:55 am, May 29, 2020

FCA compliance could be the last thing on dealers minds at the moment as they prepare for the restart on June 1 – but they do so at their peril.

In this Car Dealer Knowledge special, Automotive Compliance director Paul Speakman has given us his top tips in the video above.

He has also put together his thoughts on the most important things dealers should be concentrating on when it comes to the FCA so they don’t fall foul of the regulations.

Speakman says that while dealers are preparing to open on Monday, the last thing they need is to let FCA compliance slip.

And with social distancing making FCA compliance harder, they need to ensure they have the right procedures in place to stay compliant.

He said: ‘The last thing dealers need in these challenging times is to allow FCA Compliance to slip as their current FCA process does not fit into the social distancing guidelines.

‘There are areas of the sales department and process that the motor dealer will need to adjust to allow them to maintain and evidence FCA compliance during the sales journey.

Speakman says Automotive Compliance has a simple multi-platform compatible online ‘Covid-19 Safe Compliance’ system that is both paperless and contactless so deals can be struck at a distance and importantly remain compliant.

Here, Speakman answers our questions in more detail, or you can hear what he had to say in the video above.

What has been happening with the FCA leading up to and during the pandemic that motor dealers need to be aware of?

The FCA has been communicating to all directly authorised firms via its website, and with daily and weekly updates, and it is clear there are no concessions on compliance requirements during this pandemic for motor dealers.

Some key points they have been clear on are: 

  • Ensure customers are protected and markets continue to function well and with integrity
  • Firms to provide strong support and service to customers during this period
  • Deal with complaints promptly

What have they got to say about operational resilience?

It is essential that all firms have plans in place to manage and mitigate the operational impact of coronavirus. More generally, the FCA expects dealers to:

  • Have sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this
  • Act fairly, honestly and professionally in accordance with the best interests of customers
  • Ensure that all customer communications are clear, fair and not misleading

Does this need to me managed by someone senior?

There is no requirement for firms to have a single senior manager responsible for their coronavirus response, but firms should allocate these responsibilities in the way which best enables them to manage the risks they face. There are existing responsibilities specified in the Senior Managers Regime (SMR), for example SMF24 for operational resilience and SMF2 for financial resilience.

What about when staff are off?

Firms should consider, along with other challenges, the impact of staff absences and the need to ensure staff wellbeing on continuity of service.

Dealers must identify how staff absence or inability to use business premises can be sufficiently mitigated to ensure critical services are provided to customers.

Where dealers identify gaps through their planning that will, or could, cause harm to customers, they should notify the FCA through their usual supervisory contact.

What about when it comes to being flexible with customers’ needs?

For suitability assessments, the FCA recognises that face-to-face meetings are not possible. In such circumstances, they expect firms to use other methods to conduct a suitability assessment, such as phone calls; the FCA would then expect a dealer to send out the assessment without delay, whether online for those customers that use online or email services or by post.

They expect firms to clearly communicate any policy exclusions that may impact the cover and use of individual policies; this applies to new sales – they must clearly meet consumers’ demands and needs.

What about training – this is always critical, but is it relaxed a little now?

An update was published on May 27 on the FCA website, which is particularly relevant to dealers carrying on insurance distribution activities, saying they must ensure that each relevant employee completes a minimum of 15 hours of professional training or development in each 12-month period.

During the current pandemic, the FCA expects firms to continue to demonstrate that relevant individuals remain competent to carry out their work.

They expect most individuals will be able to continue completing this training while on furlough or working from home.

During the current situation the FCA will temporarily allow firms to let individuals in exceptional circumstances carry over any uncompleted training hours to the next year. Firms should record their decision and the reasons for it.

What should motor dealers be preparing for with the FCA?

For a start, the Motor Finance Policy Statement delayed from Q2 2020, expected later this year, on hold until at least October 1.

This includes widespread use of commission models that link brokers’ commission to the interest rate charged to the customer, leading to conflicts of interest, plans to ban commission models that give motor finance brokers/dealers an incentive to raise customers’ interest rates.

High incidence of dealers not complying with some of existing rules and guidance on the information they should disclose to customers, particularly concerns that commission disclosure was not explained early enough in the buying process.

What do they expect when it comes to looking after customers during this time?

The FCA expects lenders to provide a 3-month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. If customers are experiencing temporary payment difficulties due to coronavirus and need use of the vehicle, firms should not take steps to end the agreement or repossess the vehicle.

Lenders should not alter Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreements in a way that is unfair. 

Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related payment difficulties, firms should work with the customer to find an appropriate solution. 

What are the regulatory risks to dealers?

In these challenging times do not cut corners. There are no excuses for low enquiry level or pandemic, so focus is needed, especially in the initial surge of orders from pent-up demand during re-opening, as this could lead to exposure not only with the regulator, but lead to an increase in customer complaints, particularly if Claims Management companies pick up on weaknesses.

Make sure you can monitor your FCA process properly to maintain consistent compliance, if you can’t measure it, you can’t manage it!

What about with staff coming back from furlough – what should dealers bear in mind?

As you unfurlough, be aware that sales staff will be coming back to a very different working environment with social distancing, make sure your FCA process aligns with your social distancing policy and process.

Re-educate sales staff in the importance of not exposing you to FCA non-compliance, don’t take your eye of the ball of maintaining and evidencing FCA compliance.

Horizon scan FCA updates, this is a changing landscape as restrictions are lifted, subscribe to the daily/weekly FCA updates.

Keep up to date on FCA GABRIEL reporting – do not miss the deadline. The FCA published final notices of firms on May 21 and eight of these were car dealers.

What should dealers be considering?

We know the customer route into dealership has moved to a more online journey, e-commerce, distance-selling, so make sure your website is compliant, is clear and transparent for the customer-initiated purchase, and clearly shows your FCA status and permissions.

When it comes to social distancing, review and understand where there are potential coronavirus hotspots, to reduce the risk for exposure inherent in a traditional paper-based process.

Also, consider how you make this contactless and can substantiate and evidence compliance, from finance suitability to purchase decision and handover.

Review storage of customer paperwork – lots of paperwork in a file might not be the best way.

How can Automotive Compliance help motor dealers?

We have been busy during this challenging time in both being proactive and reactive to the needs of Motor Dealers.

As the industry re-emerges into life post lockdown, Automotive Compliance has released the ‘Covid-19 Safe Compliance’ system to embrace the new world of social distancing.

The FCA rules provide flexibility to firms in a number of areas and it expects them to use this flexibility to support consumers, to provide strong support and services to consumers during this period, ensuring they continue to be protected and that markets continue to function well.

The last thing a motor dealer needs in these challenging times is to allow FCA Compliance to slip as their current process does not fit into the social distancing guidelines. While dealers are coming to terms with what staying safe looks like in a dealership environment, it is evident they will need to adopt new working procedures for many aspects of their business to ensure the safety of their staff and customers.

Automotive Compliance have been busy working on supporting this, utilising not only our motor retail regulatory expertise, but our team’s hands-on dealership experience, in further developing our systems and processes to keep sales departments and customers safe and ensure the dealers’ FCA compliance is maintained within the government guidelines.”

Our ‘Covid-19 Safe Compliance’ system is both paperless and contactless, multi-platform compatible, whether PC-based, iPad, tablet or mobile phone and compliments whichever method of transaction the dealer is embarking on, whether that be online or a social distancing sale in the showroom, culminating in a physical showroom handover, click & collect or home delivery.

Thanks to Automotive Compliance for their help putting this article and video together. For more information visit or call 01452 671570

More Car Dealer Knowledge articles can be found here

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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