Recent research has been published suggesting that 32% of motor retailers are unaware of the Financial Conduct Authority (FCA) ban on all discretionary commission models that becomes effective from January 28th and which is linked to other mandated changes.
Recognising that the data will have been impacted by whom the researchers contacted, I still found myself disappointed and concerned by the findings.
The numbers point very clearly to the fact that people in car retailers are unaware of what is very arguably the most significant change to dealer finance in at
least the last twenty years and point to a substantial issue and business risk for many dealers.
At iComply, we have been working with an increasing number of dealer groups and individual dealers, helping them to prepare for the FCA changes for many months. It is evident from this work that many dealers recognise the risks operationally, reputationally and personally of not establishing a new fully compliant approach to finance. Internally, communication and training are critical to delivering on the changes required.
My observations on the challenges facing dealers are based on first-hand experience. In a previous role as the F&I and Compliance Director for a major dealer group. I understand the commercial and operational challenges, but I was also the person with the Senior Managers Certification Regime (SMCR) personal accountability for F&I. Every dealer or group has someone with this FCA accountability, and it is not to be taken lightly.
Any dealer who has not finalised their plans to meet the FCA changes; commission models, processes controls, training, promotional changes and the interconnected requirements really must act now. I urge you to seek expert help and guidance; the changes required are not a ten-minute fix.
The Senior Managers Certification Regime (SMCR)
Having touched on the personal accountability created by the FCA’s SMCR for someone in every dealer/group for all matters of financial service compliance. I thought a brief precis might help dealers understand the changes because they are linked. The SMCR, which has been in place since December 2019, is designed to ensure:
- Greater personal accountability at all levels
- Minimum standards of conduct
- Staff in key jobs are fit and proper to perform their roles
Everyone promoting/selling F&I products should have already:
- Completed a Statement of Responsibility (SoR) that needs to be updated at least annually;
- Maintained a record of their Continuous Professional Development (CPD) of their F&I training;
Some dealers have read that the SMCR has been delayed until March 31st. This new date only refers to parts of the implementation that except for the pandemic, should have been in place by December 9th. Most notable of the postponed elements is the need to ensure that relevant employees must have received training on the conduct rules. If 32% of dealers are unaware of the FCA’s ban on all discretionary commission models from January 28th then from an SMCR perspective, some dealers, notably the named senior person in each business, may have plenty of work to complete to protect themselves.
The FCA has been clear that they will take punitive action where they see it as necessary. This was evident at the start of December when they fined Barclays Bank UK, Barclays Bank PLC and Clydesdale Financial Services, which operated in the motor finance market as Barclays Partner Finance £26m, for operational shortcomings.
If you are interested in a positive, experienced assessment of your current policies and processes contact our team using the telephone number or email address at the end of this page.
i-Comply will work with you to identify the gaps and risks that could leave you and your business vulnerable and provide an opportunity to build an adaptive compliance programme that is effective now and into the future.