Motor Finance Position Paper

The BVRLA Position Papers outline the association’s views, objectives and engagement activity relating to key policy areas affecting the industry.

The issue explained:

The BVRLA represents over 400 leasing and leasing broker members, an increasing number of whom offer 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.

At the same time the Bank of England is looking at the prudential risk, the House of Commons Treasury Committee is scrutinising household finances.
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.

What we are 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.

Top 5 key messages:

  • The BVRLA is an industry leader in facilitating and promoting motor finance best practice via its self-regulatory code, training regime and governance programme.
  • 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.
  • Motor finance plays a vital role in providing ordinary working families with access to safe, affordable road transport. Disproportionate regulation could prevent this.
  • The BVRLA is committed to working with the FCA on its review into motor finance and FOS to raise standards.
  • The BVRLA does not believe new regulatory processes are required as members already take appropriate steps on ensuring that customers are treated fairly and are protected.

Recent BVRLA activity from Q1-2019:

  • Prepared for publication of FCA’s upcoming Motor Finance review, scenario planning and developing a communications response.
  • Engaged with the FCA and FLA in advance of the publication of the final Review report.