FCA and what it means to Motor Dealers

July 23, 2013 Industry News 0 Comments

The Finance & Leasing Association (FLA) has urged the credit industry, including those in car finance, to read the consultation paper by the Financial Services Authority (FSA) on the transfer of consumer credit regulation from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) planned for April 2014.
The FLA, trade body for car and asset finance industry, has said recent comments that the transfer will include keeping the majority of the Consumer Credit Act (CCA) intact, and that the FSA will ‘listen’ to the industry, were “gratifying”, although it remained sceptical that a satisfactory transfer could be achieved by the proposed deadline of April 2014.
Speaking to Motor Finance, Stephen Sklaroff, director general of the FLA, advised “anybody involved in the credit market in any capacity should be reading these documents. This is big and happening very soon.”
Meanwhile, Karen Wagstaffe, training and compliance director at Finance Cover & Training, told Motor Finance dealership staff with responsibility for consumer credit licensing and compliance – managing directors, compliance managers, group F&I managers, sales directors – “should be keeping an eye” on the paper.
“The consultation paper is very much geared towards improving protection for consumer groups,” said Wagstaffe. “That will only mean one thing: Additional rules and guidance.”
‘Forward planning’
With the launch of the FCA in April 2014, the consumer credit licence will cease and be replaced by a new system of authorisation. Existing credit licence holders registering before April 2014, will be granted “interim permission” to continue by the FCA, according to Sklaroff.
“It is very important people check they already have all the licences they will need in 2014,” he explained.
After April 2014, it is not known how long it will take an applicant to receive authorisation or licensing under the new regime, meaning businesses should consider what operations they may want to offer after April 2014 and apply for the licences “right now”, so as not to find themselves in a “difficult position” after the transition, said Sklaroff.
“People need to be a doing a little of forward planning,” he advised.
‘Robust systems’
Wagstaffe advised the FCA would be looking at areas of lending identified as problematic in consumers’ credit lifecycle, such as payday loan providers.
Additional rules to cover these may affect dealers’ sales procedures, said Wagstaffe, and require dealers to hold “more robust systems and controls in place,” including “documented procedures, training and competency”.
The paper states there will be a two-tiered approach to consumer credit, split between lower and high risk activities, with the credit activities of “most” dealers registering as lower risk, according to Wagstaffe.
Key proposals
According to a statement issued by the FSA, the paper, which closes on 1 May 2013, is looking for “your thoughts on the proposed framework and rules for the consumer credit regime”.
A second consultation paper on the design of the regime will be run later in the year.
22 March 2013 by Richard Irvine-Brown for Motor Finance Magazine