Can your technology cope with the new FCA regulations?
Dealers need to ensure their technology is keeping up with new FCA regulations on commission unveiled recently, iVendi is warning.
The changes, which see a ban on models that give brokers or dealers an incentive to set higher interest rates to boost their commission, create a number of danger areas when it comes to online systems, says James Tew, CEO.
“There are four main points of potential weakness that need to be resolved within any digital motor retail environment before the regulations came into effect next January.
“The first – and the most important - is to ensure that the entire customer journey is recorded in detail by the platform in a manner that is auditable in case of any future challenge. There is a danger under the new rules where the first choice lender has declined an application, as it could be easy for customers to claim they have been missold because the actual rate paid was higher than the initial advertised rate.
“The second is the greater requirement to inform the consumer about commission on every transaction and how it is earned. This is not just a matter of changing some wording but ensuring that the information is easily accessible to the user. The focus on prominence especially is key and, as commission models can vary even within a single lender, it is imperative that this information is disclosed at multiple points across the journey for each specific product.”
James said that the other areas where technology needed to be monitored existed around the wider changes that dealers were making to handle the new regulations.
“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 onto 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.
“Finally, 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.”
James added that because iVendi was FCA authorised, it was able to bring a high degree of insight to the whole issue.
“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 them, we can now align our systems to match.
“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 TCF principles in letter and spirit.”