The FCA’s recent comments on motor finance, and PCP products in particular, have been positive and should leave us feeling optimistic ahead of the organisation’s full report into motor finance sales, due for publication in September, writes Spencer Halil, director at Alphera Financial Services
It would seem that the FCA does not have a problem with PCPs per se, but reiterated in its recently published 2018 Business Plan that it will be undertaking further work on responsible lending, particularly the approach taken by motor finance lenders to assessing creditworthiness, including affordability.
It is the responsibility of the dealership’s F&I business manager to ensure that they have properly qualified a customer, and have made all the necessary affordability checks. This process is particularly important in the eyes of the FCA. If done properly, this can be highly informative for the customer, providing them with a deeper understanding of the finance products on offer, and making them aware of their repayment obligations.
However, it is the responsibility of the finance provider to educate dealers in the first place, to ensure they sell motor finance in a clear and transparent manner. It is incumbent on companies like Alphera to help improve standards of sale – something the whole industry should aspire to. We should see the FCA’s guidance as more than simply having to comply with a regulator’s demands. But rather as an opportunity to instil the culture and expertise needed to make ‘treating customers fairly’ a core value for everyone in the business of selling cars.
Speaking at recent consumer finance event, Jonathan Davidson, director of supervision – retail and authorisations at the FCA, commented that “a successful business model relies on having a healthy firm culture. You need staff that are encouraged to be curious and questioning.” I could not agree more. The basis of any successful business must be a culture that is built on values that prioritise the best outcomes for customers.
But a single company cannot drive industry-wide cultural change on its own. That is why Alphera has established a partnership with the Institute of the Motor Industry (IMI) to promote the uptake of a new accreditation scheme for finance and insurance sales specialists. The concept of training and accreditation is widely accepted for practical disciplines across the motor trade. However, until now, no IMI scheme existed to ensure high minimum standards are followed across the industry for the sale of car finance and insurance products.
Alphera’s own research has confirmed that F&I Accreditation is supported by prospective customers. We recently commissioned an independent survey of UK car buyers, in which 79% of respondents said they would be more likely to transact a finance deal on a car from a dealer with a formal industry-approved qualification. Consumers believe such a qualification could reduce the chance of being mis-sold a finance product.
In the wake of PPI mis-selling, consumers are more alert than ever to the risk of being sold an inappropriate finance. Dealer sales staff must have the skills and knowledge necessary to properly qualify a customer’s needs and deliver a clear and transparent presentation that enables informed decision-making.
An accreditation pathway, robustly assessed and backed by the IMI, will help ensure high standards and give the customer the confidence they need to trust our industry in everything we do. As well as safeguarding the compliant selling of F&I products across their business, those dealers that support relevant staff education will have the opportunity to use it as a differentiator in the sales process, helping them build trust more effectively and ultimately convert more leads.
We all want to establish higher standards of sale in the motor retail sector, where self-regulation to support compliance is the norm, renewing customer confidence in the advice and service they receive. This will come from sales staff having clearer understanding of how to confidently approach the topic of affordability with customers, making sure that would-be car buyers are sold the most appropriate finance product based on an in-depth assessment of their needs.
A customer who feels that they have been treated fairly and empowered to make their own informed decision is more likely to return to that business in future.
Alphera and the IMI hope to engage dealers and other lenders to grow the uptake of the F&I Accreditation programme. We encourage our partners and others in the industry to challenge us to do better, as we believe that finance companies are there to support dealers and help develop sales best practice. This starts with ensuring that sales teams understand everything they need to about the products they offer, and the right way to match them to customers’ needs.
F&I can be simple and clear, and it is our role to help ensure that relevant staff have the confidence to present products properly, to give car buyers every reason to return with their custom in the future.
Introducing a ‘common standard’ will demonstrate to the FCA and car buyers that the motor industry is worthy of their trust and confidence.