AS A regulator we understand that credit and leasing is an important part of the landscape, Costas Pittas of the Financial Conduct Authority explained to conference in the keynote address.
In 2021 we banned DCAs in motor finance to prevent the increase in interest for loans. Since we introduced that ban there has been an increase in complaints and most of these have been rejected. We have got involved to review historical commissions and introduced a pause giving to 4 December 2025 to give answers to consumers about those complaints.
We have also announced next steps to happen in May 2025. But despite the temporary pause it means customers won’t stop complaining. We are aware this will have resourcing issues plus there will be third parties getting involved – as you’ll see on social media.
But where there is unacceptable advertising, we will take action in areas that we regulate; if not in our area of regulation, we’ll work with other bodies that do cover it.
Market conditions
These have been challenging for both for consumers and businesses – from rising interest rates to supply issues.
But the cumulative effect has not been as severe as at other times of financial stress.
So although there are considerable headwinds it’s not unfolded in quite the way you might have expected. There’s a more nuanced picture.
It could suggest that those under financial strain are worsening or the number is growing at a much slower rate.
In terms of your market, we have received 120 complaints in lease and hire. In other words it’s hardly registering. Whether we see a move into usership away from funding options that offer ownership, particularly of EVs, will. depend on the government and the charging network which might give rise to new issues for customers.
Whatever happens, we expect customers to be treated fairly. Much of our work is based on understanding what’s happening to consumers.
BVRLA’s Shashi Maharaj on regulation
Regulation plays a key part in our lives, Shashi Maharaj, BVRLA Legal & Membership Director told conference before introducing the FCA’s Costas Pittas.
It helps shape our business – it’s a key pillar of business. We are all committed to implementing regulation so that you can deliver good customer outcomes.
The journey has not been easy, but firms have embraced the duty.
Consumer Duty is not the only item on the regulatory landscape. FCA has published guidance on how ARs are monitored. All of these developments bring new challenges and also new opportunities.
Together we can unpack the issues, and look to see where the opportunities exist.
Over our recent surveys we’ve found the level of financial stress is decreasing in 2024 but consumers are still cutting back on food and utilities even if the downward figures were positively down compared with previous years.
But it would not take much for these customers to fall into profound difficulty.
So what do we expect from businesses?
We’re looking for effective communications to understand customer vulnerabilities. This is where Consumer Duty comes into play. Do your staff have the right sort of empathy to guide customers through difficult conversations?
If mistakes are made it’s important to have the data trail to show where the issues were.
We expect firms to be asking how they interact with customers in every aspect, e.g. do your systems deliver effective outcomes; testing whether controls are effective and making adjustments.
We’ve seen some firms using testing to see if documents are fully understandable. Some have taken focus groups to understand how consumers react to wording.
I’m not suggesting that you all rush at and do that – but there is no one size fits all. We’ve seen firms reviewing customer facing recordings to ensure they understand and recognise consumer vulnerability.
We supported innovation such as digital tools, but is the tech helping customers ask the questions, such as cost, before entering into an agreement? And is there flexibility before entering into an agreement?
Technology such as speech analytics can help to understand the customer better – but it’s important to consider the end-to-end journey.
Fair value on product design
How do you assess fair value on a product that devalues?
So fair value is about more than financial costs and encompasses the whole of the transaction. It doesn’t become unfair if it’s more expensive if it includes other benefits or if one company has a higher operating cost.
Distribution chains can be complex – and we expect all sections of the chain to talk with each other to ensure good customer outcomes.
A distributor can influence the cost via terms, so businesses will have different costs, different structures. There is no single path to meeting the duty.
The future
If the last few years have taught us anything, it’s that the world can change quickly. Part of being a data led regulator is getting better data to take the pulse of the market. Of course, digital journeys will keep advancing so it’s important we take care of that.
Consumers should be able to access fair products. It’s a process of continual evolution.
And what the change in consumer preferences will mean as we move – or indeed if we move – from ownership models to usership models.
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Broker News Newsletter 14 January 2025
Catch up on the latest leasing broker news in the 14 January 2025 Broker News newsletter
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
