MotoNovo Finance has warned dealers to take seriously the new FCA rules on motor finance that come into effect in January.
MotoNovo Finance deputy CEO Karl Werner said there was no place for ‘body swerves or gamification’ that might replicate the soon to be banned dealer discretion on commission rates.
All discretionary commission models for finance will be banned from January 28th and new commission models must avoid anything that looks like a discretionary commission arrangement, a definition that the regulator notes; ‘should be interpreted broadly.’
While the FCA does not specify what is acceptable as a commission model, it has said: ‘It could include firms moving to risk-based pricing, provided the broker is not incentivised to set or adjust the rate charged. It could include flat fee models.’
Werner said lenders and dealers have a duty of care to honour the spirit and letter of the FCA Policy Statement to protect car buyers and the broader dealer finance industry.
“The dealer finance model needs to be reinvented to meet the FCA’s requirements in full. There is no place for body-swerves or gamification that might replicate any part of the soon-to-be banned dealer discretion. Such a move would only serve to damage the reputation of dealer finance and encourage damaging claims management company activity.
“The changes required are an opportunity to demonstrate to the broad public the industry’s commitment to business cultures centred upon doing the right thing for customers. This principle is also an integral part of the FCA’s SM&CR responsibilities for senior leaders in dealerships and lenders. How we react to the test of embracing, not just the letter, but spirit of the FCA’s Policy Statement stands to have a big part in the future of dealer finance.”