Introducing the FCA's Consumer Duty

The Financial Conduct Authority (FCA) has recently introduced new requirements known as the Consumer Duty, and it is crucial for all finance companies, brokers, and dealers in the motor trade to work together to deliver good outcomes for all retail customers.

What is the Consumer Duty?

Consumer Duty is a new principle established by the FCA, which requires companies in the motor trade selling financial products, to ensure that they deliver good customer outcomes.

The FCA introduced Consumer Duty following an investigation that revealed several issues in the industry. These issues included unsuitable finance products for customers, unfair pricing, misleading or unclear customer communications and poor levels of customer service and support.

The new rules include:

• A new Consumer Principle that requires firms to act in a way that achieves positive outcomes for customers
• Cross-cutting rules that provide clarity on our expectations under the new Principle and help firms interpret the four desired outcomes (see ‘What should you do’ below)
• Rules relating to the four outcomes that the FCA aim to see under the Consumer Duty

These outcomes represent key elements of the dealer and consumer relationship that contribute to positive customer outcomes.

What should you do?

The FCA has outlined areas that finance companies and motor dealers should focus on to ensure they deliver positive customer outcomes. It’s important that you work out how it affects you and your customers! For a more detailed understanding of the Consumer Duty and its implications for your dealership, we recommend visiting the official Consumer Duty page on the FCA website. (LINK)

Only you will be able to make sure your business is able to meet the requirements of the Consumer Duty. However, the following questions may be useful for you to consider for your dealership:

• Are the finance products and services you sell designed to meet your customer’s needs?
• Do the products you sell and how you get paid for them, provide fair pricing and overall benefits to customers?
• Do you have detailed information about the products you sell, allowing you to advise your customers of their features and benefits?
• Can you provide enough support to your customers throughout their purchase journey and answer any questions or concerns they may have?

Good customer outcomes

The Consumer Duty is made up of an overarching principle and new rules we will have to follow. It will mean that customers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.

All businesses involved in selling financial products MUST avoid causing foreseeable harm and be able to demonstrate they are providing good outcomes for customers.

At First Response Finance Ltd, we are fully committed to embracing the Consumer Duty and supporting our dealer partners to understand how they can deliver excellent customer outcomes. We encourage you to assess the suitability and value of the products you sell from each of the lenders you have a relationship with, to ensure that your customers receive the best possible service.

Bad customer outcomes

If customers are not provided with the correct information or support, they may face challenges in making well-informed and timely decisions. This can result in customers agreeing to buy products or services that do not meet their needs, lack adequate quality, pose risks, or cause harm to them.

Customers may also experience greater financial and non-financial challenges due to these issues. They may also receive poor service from their interactions with these companies, which can also make it difficult for customers to switch providers or get a better deal. It is crucial to address these concerns to protect customers and prevent bad customer outcomes.

Impact of good customer outcomes on your dealership

• Happy customers enhancing your reputation
• Great reviews
• Repeat business
• Fewer complaints

Impact of bad customer outcomes on your dealership

• Reputational damage
• Poor reviews
• Reduction in repeat business
• Commissions claw backs from deals being unwound
• Complaints

Additional Resources

As part of our dedication to transparency, we will share relevant information about our products with our dealers who distribute them. This will allow you to review the suitability and value of our finance product for your customers.  Here you can read our review of our Hire Purchase (HP) product.

You can find more information about the Consumer Duty and what it means for your dealership, by visiting the official FCA Consumer Duty page.

Partner with us

If you want to work with one of the best sub-prime finance companies in the UK, First Response Finance is here for you. Our flexible criteria, award-winning service, and consistent recognition from the industry, we are the go-to sub-prime finance company in the motor trade that you can trust.

Partner with us and experience the difference of working with the best subprime finance lenders, dedicated to helping you and your dealership get more deals over the line. If you don’t currently work with First Response Finance and would like to discuss how we can help you and your sub-prime customers, click the relevant button below, and Brad from our team will be in touch to discuss how we can help you sell more cars on finance.

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