The Motor Finance Industry: How to Apply the Consumer Duty Principle

On 1 March 2023, the FCA released a portfolio letter titled "Implementing the Consumer Duty in the Motor Finance Providers Portfolio." The letter highlights the need for a more consumer-focused approach and emphasizes that CEOs or directors should personally focus on implementing the Consumer Duty.

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Motor Finance companies are expected to prioritize the needs of their consumers and embed this approach throughout their business strategy and culture. The FCA has identified "existing drivers of harm in this portfolio" and has prioritized the implementation of the Consumer Duty by the Motor Finance industry.

Annex 1 of the letter outlines how the Consumer Duty can be applied to the Motor Finance industry. Companies should ensure that their products are designed to meet the needs and objectives of their customers, provide fair value finance options, communicate with customers in a way that promotes understanding, offer support throughout the product or service lifecycle, define their roles in the distribution chain, and monitor customer outcomes at the board level.

Annex 2 lists red flags that the industry should consider, including affordability assessments, fair pricing and value, tailored communication, and consumer support for vulnerable customers.

Next steps

Firms are expected to have advanced implementation plans and be able to discuss the Consumer Duty with the FCA, providing information on reviews and assessments conducted during the embedding process. Companies can seek help with the embedding process and FCA expectations if required.

In summary, the Motor Finance industry must prioritize the needs of its customers and embed the Consumer Duty principle throughout its business strategy and culture, as outlined by the FCA in its portfolio letter.

What it means for you

If you want more information on the new Consumer Duty and how it could affect your firm, reach out to MEMA for more information on how we can support you in preparing for the new changes.