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Every day, car dealerships and brokers across the country work to finance the purchase of new and used vehicles for their customers. This process can be complicated, as the industry is heavily regulated by both the FCA and FOS, so it’s important for dealers and brokers to make sure they’re up to date on all the latest compliance requirements. This can be a daunting task, but fortunately there are tools and resources available to help make things easier. At Marsh Finance we work with dealers across the country to help them stay compliant and operate successfully within the regulations.

What is compliance in the automotive finance industry, and why is it important?

There are standards and regulations set out by the FCA (Financial Conduct Authority), which car finance organisations and brokers need to follow.

Good compliance is a necessary condition for any business to thrive. It is an important term for any automotive business to understand. It’s the status your company achieves when it follows all the laws and regulations as outlined by relevant regulatory bodies, such as the FCA.

FCA regulations are designed to ensure that all your customers are treated fairly and that you are assessing the needs of your customer every time you offer or sell regulated products such as car finance and general insurance. You must make sure that you provide clear, consistent, and fair advice each time, and you must have the ability to demonstrate that this is done for every sale.

What are the benefits of being compliant with FCA regulations?

Credibility – Good compliance is a necessary component of credibility in any industry, but especially in motor finance. Dealerships and introducers who understand this will find it easier to establish trust within their given industries. Companies with a long-term history of compliance, therefore, have an advantage over their competitors.

Reputation – One of the key benefits of operating in a legally compliant way is the fact an organisation’s reputation increases as a result. It makes it easier to build strong relationships and generate external investment. Investors view them as a reliable alternative and know their money is safe and investable.

Competitive Market – The implementation of rules and regulations is a way for companies to compete more evenly. For example, if one company acts outside regulatory and compliance boundaries in an unethical manner, they have the potential to generate higher profits than their competitors who act ethically by complying with UK’s standards. The benefits that come along with being compliant can be seen as both protection against monopolistic practices or unfair competition but also improve overall market health because it creates stability on how businesses operate

Stable Practice – Financial compliance legislation provides a stable framework for companies to operate in. This means only reliable and viable financial products exist, which prevents any organisation from engaging in excessive risk-taking that could lead them towards bankruptcy or other underlying worries about an organisation’s stability. The process protects both parties by preventing unstable practices.

Customer Safety – There are a lot of rules and regulations in the financial industry, but they serve one purpose: protection for customers. The late 2000s saw an outbreak where companies were trading risky shares and giving out finance products to consumers that were doomed to fail. Compliance with regulatory standards ensures that people always safe when taking out a financial product.

What are the main regulations for the automotive finance industry?

  • New Consumer Duty
  • FLA SAF training requirements
  • Financial Promotions
  • Financial Crime
  • ICO25
  • Customer Affordability

According to Finance and Leasing Association data, which was reported in the Guardian, the value of car loans in the UK almost trebled to £32bn between 2009 and 2016 and, as with any rapid market expansion, risk management, controls and compliance are not likely to have been at the front of everyone’s mind.

However, the FCA have acted and introduced stricter rules, and introduced the New Consumer Duty in 2022.

Marsh Finance is committed to ensuring outstanding compliance, within our business and externally with our partners. We’ve been in the industry for almost 50 years, so it’s no surprise that we know a thing or two about compliance and operational efficiencies. Our team knows how to make your company’s operations run smoothly and efficiently, so you can focus on what matters most: growing your business!

At Marsh Finance, we offer a variety of compliance solutions that are tailored to meet the needs of car dealerships and brokers of all sizes. Contact us today to learn more about how we can help you stay compliant.