Staff incentives, remuneration & performance management in consumer credit

In July, the FCA issued a consultation document ‘Staff Incentives, Remuneration and Performance Management in Consumer Credit’, seeking feedback from the market by October 4^th as they move towards formal plans/guidance. It is likely to have a significant impact on both car sales and finance as MotoNovo Finance Motor Division CEO Karl Werner notes:

“The FCA’s announcement, which is set to affect customer facing staff and their managers across all areas of lending and collection activity, is likely to have a significant impact on both car sales and car financing. Overall, we believe that the changes that are likely to be required will help to enhance consumer and perceptions of dealer finance by ensuring their needs are at the forefront of the credit process.

“As always, we are ready to work with the FCA through the consultation and with our dealers to support them in creating the changes required positively. Dealer finance will remain a key aspect of car sales and we continue to believe that the dealer will be an important part of this process.”

The FCA’s Consultation Paper identifies both positive and negative practices from its thematic review of the market. Helpfully, the conclusions are more prescriptive in how it expects the wider market to change than in previous work. It is an approach that Werner welcomes;

“I’m pleased to see that the FCA has outlined some clear steps that it sees as likely to be required in their Draft Non-Handbook Guidance notes. These include areas such as assessing the risks associated with consumer credit activities and insight on staff incentives that they see as having both a positive and negative impact upon the consumer. They are at pains to point out that there is no ‘one size fits all’ approach, but we can see a path emerging to help guide dealers on the likely changes ahead.”

The scope of the FCA’s plans includes unregulated activity that is financed by a credit agreement for which the firm is carrying on consumer credit lending or broking. Even in the case of 0% finance where no dealer or sales person income may accrue, the risks to the consumer and due processes will need to be addressed in the way the finance is promoted. Again, Werner sees this as a constructive and one where technology can play an increasing role to help the dealer and their customer, as he concludes:

“Given the prominent role of finance as a marketing tool in car sales, we foresee an even more important focus for dealers on creating a positive customer experience; one that can further enhance the reputation of dealer finance. Within this, the importance of measurable procedures and controls in the financing approach will increase inevitably. It seems probable that we will see a wider role for technology with the customer taking greater control of their own finance journey. Our new Self-Serve application, which is available in the showroom, or in the customer’s home/office would appear to suit this role, in supporting both the dealer and consumer.”