Close Brothers Motor Finance has outlined some of the key things dealers should be thinking about to make sure they comply with the Financial Conduct Authority’s (FCA) consumer duty regulations.
Finance providers have until July 31 before the new regulations start.
The consumer duty is aimed at creating higher standards for consumers and improving competition in the retail financial services market. Within the motor retail sector, this will predominantly impact dealerships providing financing and insurance products.
The consumer duty comprises three key elements: A new Consumer Principle; cross-cutting rules requiring retailers to act in good faith (e.g. providing truthful information), avoid foreseeable harm (e.g. steps taken in areas such as affordability checks) and help consumers achieve their financial objectives (e.g. supporting customers receive value). The FCA has also set out four consumer outcomes related to – consumer understanding, price and value, product and services and consumer support.
The FCA has warned there will be “swift action” for those that ignore its new Consumer Duty standards.
Close Brothers Motor Finance’s top five tips:
1. Reviewing your sales processes
You should consider looking at every aspect of the sales process and customer touchpoints to satisfy yourself that you’re acting at all times to demonstrate that you’re delivering good customer outcomes. Evidence of this is very important so it’s worth looking at ways of measuring, like using the information you gather as a business from customers to demonstrate value.
2. Customer communication
You might want to look at all your customer communications material, including your website, for clarity and simplicity. For instance, do you explain the nature of products, their benefits and limitations in a way that is understandable to your customers, so they’re making informed decisions?
3. Knowing how you will document and review product information
You receive product information from your finance providers. You could consider demonstrating how you deliver good customer outcomes by documenting how you regularly review how you sell your products, to make sure customers use the products as anticipated, as well as by documenting the regular training you provide to your teams on how they sell the products.
4. Customer support
When customers do need support from you, the FCA will want to know that the process for contacting you is clear and simple. It’s worth reviewing your existing customer communications and support you provide to see if they could be improved.
5. Customer vulnerability
A key part of the FCA regulations is to protect vulnerable customers of all kinds. So making sure your communications are appropriate for those with characteristics of vulnerability – like physical and mental health conditions, and also financial issues and lack of understanding – is important. Think about how you identify, record and provide the right levels of support for vulnerable customers.
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