Dealerships warned to remember FCA rules

Dealerships and automotive finance lenders have been warned to ensure they are still complying with new FCA guidelines during the Covid-19 crisis.

Changes include the FCA accepting digital signatures on loan agreements and more online meetings with clients, which will require verification methods of income and address.

The FCA said: “Firms should consider the client’s best interests rule and the fair, clear and not misleading rule to ensure that, when a client signs a document electronically, this does not make it more difficult for the client to understand what they are agreeing to.”

Paul Grainger, CEO of compliance and regulatory consultancy Complyport, said: “The Covid-19 crisis has meant that we have lost the ability to have physical one-to-one meetings to check applications and explain the implications of legal agreements entered into by customers.

“However, automotive finance lenders and motor dealership staff dealing with loan finance must still ensure that in the new ‘norm’ of digital meetings and electronic transactions, the finance process is compliant with FCA requirements. Firm’s must fully consider the legal position around the use of electronic signatures and, indeed, around other associated areas such as explicit consent needed in the processing of certain data.

“So we would expect firms to review their processes and procedures. We expect firms to take a pragmatic approach to adapting process and procedures to facilitate the provision of suitable advice and transactions for their customers, whilst ensuring they remain compliant with FCA requirements.”

The FCA has also provided guidelines for a three-month payment freeze to customers that are facing financial difficulties in meeting their finance or leasing payments due to coronavirus and suggests firms not to end any agreements or repossess vehicles.

Firms may fairly adjust the terms of a contract affected by coronavirus if needed. Firms should not use temporary depreciation of car prices to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. They should offer to the affected customer appropriate solutions in case they wish to keep their vehicle at the end of their PCP agreement but cannot cover the balloon payment due to financial difficulties caused by the coronavirus.