One of the seeming facts of life is that once you enter the motor finance industry, there is a high chance you’ll never leave it. And while moving to Auto Trader may not seem like a massive jump from this market, the loss of Paul Harrison, head of motor finance at the Finance & Leasing Association (FLA) will still be keenly felt by those in the industry, just as finance companies start their applications for full Financial Conduct Authority (FCA) authorisation.
Harrison will still be working on finance, though. He tells Motor Finance: "I’m going in to give them a voice on car finance matters among other issues because it is just so important. So, in many ways there will be similarities to my role at the FLA."
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One area that may be different is the amount of time he spends on regulation. For him, work on the FCA has been going on for some time: "We have been lobbying for the new regulatory regime for about five years. I think back, and we were lobbying the treasury ministers hard at the time of the Coalition Government coming together for a regime that reflected the characteristics of the consumer credit market.
The FLA needed to ensure the interests of consumer credit were looked after in a period of reform that was primarily focused on banking reform. Overall, Harrison says the hard work has paid off: "I think where we’ve ended up now is a really good place because we have got – albeit with a really challenging timetable – a better set of rules than potentially we could have had. We have a rule book which reflects the diversity and different dynamics of consumer credit versus banking."
Lobbying
The work he’s done over these five years lobbying over the FCA is one of the things he says he’s proudest of. However he also looks back on other areas of his work with satisfaction. He says: "One of the things I’m most proud of in my time at the FLA is working with the members and dealers on the issue of commission disclosure following the OFT’s publication of guidance in 2011 for credit brokers and intermediaries."
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By GlobalDataAt the time, this particular piece of guidance was not overly aimed at FLA members. Despite this, the FLA held a series of detailed discussions on the issue of how best to go about disclosing commission and ensuring that customers are treated fairly and in a transparent way.
This groundwork has recently become increasingly important, as treating customers fairly and transparently is a cornerstone of what the FCA is trying to achieve, and Harrison says: "I believe having those discussions back in 2011 really helped lay a good foundation for where we are today in dealing with the FCA’s more stringent rules and requirements. Without these earlier discussions, it could have been a more difficult process here and now."
Looking ahead, the FLA and the industry is still going to have to get to grips with the new regulator, something Harrison says the FLA will continue to be involved in once he has gone.
He says: "I think our role as the FLA is to now help our members and the intermediaries that our members work with to get through the authorisation process.
"We know it’s a lot more burdensome than the OFT regime, so it’s doing what we can centrally to help people prepare, get their business plans together, understand the FCA’s expectations and also help firms to interpret the FCA rules."
Beyond the work he’s done, Harrison is able to look back on an industry which has grown and grown during his time with it. When he first joined the FLA, finance penetration in the new car finance market was approximately 45%, but it has since grown to today’s high water mark, sitting at around the 75% mark.
Even beyond this rapid acceleration, Harrison says there have been a number of interesting trends: "Back in 2006, there was a fierce competition with the direct lenders, the personal loan providers.
"The economic downturn meant banks had less appetite to lend, at least on an unsecured basis, while dealer finance remained available and remained attractive to people looking for credit because it is largely secured. And I think we’ve seen that trend accelerate in recent years, thanks in no small part to PCP agreements.
As a result of these changes and the growth of finance in general, Harrison describes the industry as being in an incredibly strong position at the moment, with good growth coming from both new and used car segments.
Base rates are one area aside from regulation that some in the industry have feared could cause issues in the future. In Harrison’s view: "I think we all know it’s going to be relatively slow when they do start to move, but it will still impact the market, consumer demand and consumer appetite for finance. And not just car finance either – general credit market conditions."
Yet it is the FCA which remains central to his parting advice to the industry: "Take the FCA seriously. We all know it is very different to the OFT. There is absolutely a requirement to the people to work closely with the FCA. Don’t fear them, work closely in a genuinely partnership. Check the website on a regular basis; ensure you understand the guidance that’s coming out and what it means for your business.
"And the FLA has an important role to play in the market as well for those companies that we look after to ensure we keep them fully informed, and give them the information and support they need." n
