FCA to review motor finance market
The Financial Conduct Authority (FCA) is concerned about "irresponsible lending" in the UK motor finance industry, and will conduct a review of the sector.
In its business plan for 2017/2018, which was published last week, the regulator said: "We are concerned that there may be a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance industry. We will conduct an exploratory piece of work to identify who uses these products and assess the sales processes, whether the products cause harm and the due diligence that firms undertake before providing motor finance.
"Following the review we will assess whether and how to intervene in the market."
Reporting on the news, the Telegraph said that under the current system drivers only need to pass a basic credit check before taking out deals worth hundreds of pounds a month -- without proving they can afford to make repayments.
Finance deals are becoming increasingly popular in both the new and used car markets, and there are fears that some customers are being encouraged to spend their entire disposable income on "pay monthly" deals.
The National Franchised Dealers Association (NFDA) said that it would liaise with the FCA on the exploratory enquiry to ensure that the outcome is satisfactory for both consumers and dealers.
"Strong vehicle sales are vital to the UK economy and it is important that any consumer credit regulation is proportionate and does not harm this," said NFDA director Sue Robinson.
Meanwhile, the Finance and Leasing Association (FLA) said in a statement: "The motor finance industry is committed to responsible lending and to high standards of customer service. We will continue to work closely with the Financial Conduct Authority to ensure they have a good understanding of this highly competitive and diverse market."