Motor finance provides an essential lifeline for millions of working families who rely on having the ability to access affordable finance to get a car or van to help them go about their daily business. The BVRLA represents over 400 leasing and leasing broker members, an increasing number of whom offer motor finance.
What are the challenges facing motor finance?
The growth in the motor finance market has been driven largely by the increase in personal leasing, reflecting drivers’ shift from vehicle ownership to usership. Against this backdrop, the Financial Conduct Authority (FCA) announced in its 2017 Business Plan, its intention to look at the motor finance market to ensure that it works well to assess consumer risk.
In February 2016, the FCA conducted research into how firms assess creditworthiness, including affordability. In its interim report in March 2018, the FCA found that most of the growth in motor finance has been to those with higher credit scores, with just 3% of outstanding motor finance going to those with poor credit scores. The FCA also found that lenders were managing risk to their business from a potential fall in car prices adequately.
The Bank of England’s Prudential Regulation Authority (PRA) also looked at the prudential risk in consumer credit, including motor finance. Its review found that PRA-regulated firms providing motor finance have adopted a reasonably prudent approach to Guaranteed Future Value (GFV) setting, ranging from 85-95% of expected future value.
The FCA’s update on the motor finance review and the Bank of England statement on its review of consumer credit, including motor finance, can both be read online.
What is the BVRLA asking of policymakers?
- To engage with the BVRLA and its members to ensure a collective, coordinated and proportionate approach from government, regulators and industry.
- To acknowledge and promote the BVRLA’s best practice and governance, demonstrating members’ commitment to delivering good customer outcomes.
- To take a balanced and proportionate response to ensure that the vehicle leasing sector is not unfairly penalised.
- To adopt a targeted enforcement plan on firms that are non-compliant.
What has the BVRLA done on motor finance?
- The BVRLA has met Philip Slater, Director of Retail Supervision at the FCA and the Consumer Credit Team at HM Treasury. We have also held meetings with senior politicians to promote the work the BVRLA is doing to raise industry standards.
- The BVRLA has developed a member toolkit providing advice, guidance and training on financial promotions, affordability and suitability, effective decision-making, complaint handling and compliance monitoring.
- The BVRLA developed a factsheet to explain the importance of motor finance and to educate about the different types of motor finance products distinguishing usership from ownership.
What are the next steps for the motor finance campaign?
- The BVRLA will continue its work to raise standards across the industry and protect consumers through its robust and effective governance programme.
- The BVRLA will continue to lead the industry’s efforts to ensure that customers have access to the clearest possible guidance about the different types of motor finance products.
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