Andrew Bailey, chief executive of the Financial Conduct Authority (FCA) has described PCP deals as “not irrational at all,” in an interview with the Guardian published today.
Although not a new product, PCP deals have increasingly come to dominate the new car finance market. According to Finance & Leasing Association (FLA) figures, PCP made up 86.6% of all new car finance in 2016, up from 81.4% in 2015.
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The prevalence of PCP has led to some national commentators speculating that it was being mis-sold, and that it is leaving too much residual risk on the shoulders of lenders.
In April, the FCA revealed it was planning to review the motor finance market in its business plan, citing worries around a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance sector.
In July the regulator released an update on the plan in which it said, among other things, it was looking at whether firms were giving customers transparent information about motor finance products.
This clearly still remains a regulator for the regulator, and speaking to the Guardian, Bailey said the regulator was on alert for deals consumers may not understand, especially around clauses which could add extra payments at the end of a contract – such as mileage limits and regarding conditions of the car.
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