Since January this year, 38 motor dealers have received final notices that have been published on the Financial Conduct Authority website and have had their consumer credit permissions cancelled. In only the past 6 weeks, there has been at least 1 case per week, accounting for 8 motor dealers losing their permissions to offer finance to customers.
The Financial Conduct Authority gave the following reasons for the removal of the motor dealers:
- Failure to satisfy the suitable threshold conditions.
- Not being open and co-operative with the Authority (FCA).
- Failed to comply with Principle 11 – ‘Relations with regulators’; “A firm must deal with its regulators in an open and cooperative way and must disclose to the FCA appropriately anything relating to the firm of which that regulator would reasonably expect notice”.
- Lead the Authority to conclude the firm has failed to manage its business in such a way as to ensure that its affairs were conducted in a sound and prudent manner, that it is not a fit and proper person.
In reviewing these final notices, an authority in the industry comments: “With all the FCA activity and ongoing consultations in the consumer credit market, it is common knowledge that the regulator is carrying out research into a number of areas of motor finance and dealers need to be mindful and review their current processes to understand if they have of any shortfalls.”
In completing the application the dealer has already committed and confirmed that they have regulatory practice in place, as follows:
- Applicant has procedures and Management Information to support they’re Treating Customers Fairly.
- Applicant has the ability to complete its regulatory returns via GABRIEL
- Applicant has documented compliance procedures in place.
- Applicant has a compliance monitoring programme document.
- The dealer may be asked to demonstrate any or all of the above after their permissions have been approved, not at the point of application. In some instances of these notices, it may well be the dealer has assumed they were too small to implement such practices and that the regulator would not be checking. What is becoming apparent is that some motor dealers have likened their Consumer Credit application to that of the prior regulator, The Office of Fair Trading, which was a completely different regime.
The same expert added, “On the surface, it may appear to be relatively easy to submit an application for authorisation particularly for limited permissions, which covers the motor dealers credit broking activities. However, that is just the start, motor dealers need to have clear documentation and processes around “Treating Customers Fairly”, complaints procedures and financial promotions for their website and social media activity.”