The handover for the regulation of activity caught by the Consumer Credit Act completed early last year and the grace period for the Financial Conduct Authority (“FCA”) not taking action, provided firms have adhered to existing Office of Fair Trading guidance and Consumer Credit Act requirements, will expire at the end of March 2015.
Any searching of personal contract purchase or PCP does not produce any relevant results on the FCA‘s website at www.fca.org.uk which shows the FCA have not felt it necessary to do so yet. However, this leaves uncertainty for providers of PCP arrangements.
That uncertainty about compliance is coupled with an upward trend on fines: RBS were recently fined £56m by the FCA and total fines to 20 November 2014 were just under £1.5billion, a dramatic increase on the total fines for 2013 of under £500,000.
While there may be more substantial targets, and activity which has attracted more adverse publicity (pay day lenders, debt collectors etc.), automotive businesses cannot afford to be complacent. Finance has been such an integral part of the automotive market and sales are at a high level in the UK. Motor cars remain one of the more substantial purchases that people will make. As ever, young people will be keen to buy their cars, especially as they become more connected and, as we live longer, the elderly will be car buyers in greater numbers. These more vulnerable types of buyer may be complaining to the FCA in greater numbers.
The profile of automotive may also be raised in 2015 by the Consumer Rights Bill which is expected to come into force on 1 October 2015, while on 1 January 2015 the EU Regulations on Product Safety and Market Surveillance was expected to come into force (which deals with various matters including recalls. For the first time digital products are also covered in the Consumer Rights Bill.
As other sectors have found, regulators base their intervention strategy on the information available, and that comes primarily from complaints. Thus if the FCA’s contact with, or monitoring of, the industry (via those bad apples who attract the majority of such complaints) were to show up a pattern of making unfair profits from the finance element of a sale to an unacceptable extent, that may well result in more attention focusing on the automotive sector as a while.
It is therefore vital to ensure that your compliance is up to date. Principle 2.1.1, R 11 provides that a firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect. This means, first, making sure that your internal processes are designed to bring problems to your attention. There should be a “no blame” culture including “whistle-blowing” policies to draw any potential issues to the surface as quickly as possible.
Even businesses that have been scrupulous in their treatment of customers can find themselves in serious difficult if their documentation does not reflect the actual practice of the business. There are also increasingly opportunities for mischievous competitors or disgruntled employees “whistle-blowing” in order to put additional administrative burdens on your business or bring employment claims. The FCA’s emphasis on record keeping, and the long lead in means not having good records will seriously undermine any disclosure or defence that you might wish to rely on in response to such challenges, and the peace of mind that comes from knowing that your documentation is correct and to the required level of detail should not be underestimated. In short - it is worth doing an audit of your compliance now, before it comes to the crunch.