THE industry will be looking to change things sooner rather than later, after Britain’s financial watchdog said it had ‘serious concerns’ about the way lenders were choosing to reward car retailers and other credit brokers.
That’s according to Codeweavers sales director Shaun Harris, after the Financial and Conduct Authority (FCA) accused some car dealers of overcharging some of their customers by more than £1,000 to boost their commission.
‘While the FCA and industry stakeholders will be consulting in the weeks ahead following the regulator’s publication of its report on motor finance, the clarity within the report suggests some of the key changes that are likely to be required. I’m sure we will see the industry moving to effect changes sooner rather than later,’ he said.
The senior executive at the automotive financial software experts said the regulator had signalled three areas where change was likely to occur:
The end of the DIC [difference in charges] commission model in all guises
An increased focus on transparency through the financing journey
Greater rigour in the affordability checking process
Harris added that over-arching them was the move by the regulator to affirm the need for lenders to ensure they undertook oversight of dealer/broker financing activities. With multiple lenders typically used by a dealer, the accountability for this responsibility was something needing clarity, and dealers and brokers had to recognise that it was coming.
‘It may be uncomfortable, but moves to remove a dealer’s capacity to vary interest rates to increase commission are likely to emerge sooner rather than later, and alongside these may well be a requirement that commission levels are disclosed,’ he said.
‘Arguably, such changes have been inevitable. Some major dealers already operate on a single fixed interest rate approach, and I expect this to become the new norm.
‘The elephant in the room here will be the impact on income. It seems inevitable that there will be some knock-on impact on metal pricing, and for this reason I expect that a rapid domino effect will take place as lenders follow one another to reflect the regulator’s desired position well ahead of any cut-off date.’
MORE: FCA considers commission changes after ‘serious concerns’ about lender rewards
MORE: PPI claims firms targeting car finance deals as FCA report looms, says expert
MORE: Daily Mail investigation – ‘No-one was mis-sold anything,’ says FLA
