Lenders must take notice of the Financial Conduct Authority’s challenge.
2014 sales figures of new cars in the UK have reached a 10 year high with positive forecasts for 2015.
The new car sales figures are returning to pre-recession levels, which is great news for an industry that employs directly and indirectly 720,000 people, just over 18,000 of whom are young people on apprenticeships.
However, as 75.9% of all new cars sold in the UK were financed in some way, the Financial Controlling Authority’s (FCA) influence on the sector is to be taken very seriously.
The FCA issued £1.47 Billion worth of fines in 2014, mostly on short-term high-cost creditors (aka Payday Lenders) and banks.
The FCA’s focus on the consumer credit market will continue throughout 2015 with a promise to rid the market of lenders that do not meet FCA standards.
Now more than ever, lenders, creditors and financiers must actively demonstrate responsible and fair consumer lending practices.
Responsible lending practices means a number of things including-
- Transparent- Being completely clear on what you are offering the customer, how it is structured and what happens in the event of default
- Affordable- Ensure that customers can afford the finance package for the duration of the contract
If creditors, lenders and financiers can do this they will be free from penalties to enjoy the rising tide of the economic recovery in which we all have an interest.
Technology has sped up the application to approval process for consumers to make the process last minutes rather than hours.
Now technology is able to support both sides of the market by helping lenders keep pace with evolving requirements and streamlining the processes and the consumer through making sure only FCA compliant lenders are approached for credit.
This increase in the speed of turnaround for applications doesn’t mean the underwriting process is less stringent. The same checks with credit and fraud detection agencies are done as well as more industry specific checks for example Glass in the motor finance trade.
The computer only says ‘yes’ when all the eligibility criteria, as defined specifically by each lender, have been met.
This means lenders can showcase their responsible practices to the FCA whilst also keeping the customer experience positive and internal costs are reduced.
Graham Donald is MD of Pancredit, the technical partner of FairMoneyTM providing the Multi Agency Decision Engine software that powers the FairMoneyTM search and comparison tables.
