With the deadlines for securing full FCA authorisation looming on the horizon, Alphera’s Andy Gruber takes a look at some of the lessons the UK market can learn from other countries that have adapted to differing levels of regulation.
Over the past 12 months, there’s been a lot of talk about what the changeover from the OFT to the FCA will mean for dealers and lenders offering motor finance in the UK. We’ve all attended conferences, seminars and workshops designed to help us through the process and we’ve even delivered some thoughts of our own, based on our interpretation of the FCA’s rulebook.
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Of course, while every market is different, this isn’t the first time we’ve come up against a change in regulatory environment. Indeed, with operations for Alphera in more than 25 countries worldwide, we’ve certainly been able to see the benefits and opportunities that a focus on transparency and customer service can bring.
We very much see the FCA as global leader in the governance of the financial services industry with clearly defined expectations towards all consumer credit firms, namely the fair treatment of the customer and the management information and reporting in place to demonstrate that this is embedded in the culture of the business.
The arrival of the FCA is a once-in-a-generation opportunity to make a fundamental difference to the way in which the motor finance industry is perceived by all. We have a substantial obligation as an industry to ensure that the products and services we offer, and the retail environment in which we operate, are not only fit-for-purpose today, but also able to withstand the evolution in the months and years to come.
With that in mind, it’s important to take on board lessons learned from other markets in adapting to regulatory change in the motor finance industry.
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By GlobalDataSince we are operating globally, we at Alphera have had adapt to varying degrees of regulatory stringency, with markets ranging from the US and Canada, through most of Europe, to Asia-Pacific markets such as South Korea and Australia.
For example, the Consumer Protection Act introduced in South Africa back in 2011 covers a series of rights that ensure fair, honest and value-for-money business is conducted.
In some markets the regulatory environment has clearly led to a change in the competitive landscape and a slimming of margin.
In one European market, for example, the maximum commission has been set by the regulator, which has led to a levelling of commission and a higher emphasis being placed on service and ease of use for the dealers.
In another market, the regulator has opened up competition and has enabled independent and captive finance house to tender for the entire finance business of a dealer group, therefore removing the traditional captive/independent split.
The principles-based approach adopted by the FCA is, however, different in the way that it drives the right behaviour with consumer credit firms, while not being overly prescriptive as to how to go about achieving this.
We at Alphera really welcome this approach, since it gives our industry a great opportunity to change the culture and processes on its own terms. In my view, our industry would be well advised to seize this opportunity and do it quickly, since the alternative is a more rigid, prescriptive form of regulation as we can already see in other markets.
I strongly believe that treating the customer fairly will help dealers drive customer loyalty, sales performance, financial results and ultimately overall growth.
If every consumer credit firm adopts the FCA principles, the motor retail industry should emerge stronger and more robust than ever.
Ensuring good customer outcomes and treating the customer fairly are both solid principles on which to build a motor retail industry that is geared for growth. The cultural change, which will happen over the coming months as a result of the FCA, will shape the sector for decades to come.
Andy Gruber is director at Alphera Financial services
