Summary
What this article covers in 30 seconds
- The FCA announced plans to issue S166 Requirement Notices to several motor finance firms over historical sales practices.
- The review focuses on discretionary commission arrangements, which were banned in 2021 after concerns about incentives to raise finance costs.
- Firms should review frameworks, practices and potential past-business exposure while strengthening evidence of customer conversations.
- Conversation Intelligence helps create searchable records, transcripts, segmentation and assurance over customer interactions.
On 11th January 2024, the FCA announced plans to issue S166 Requirement Notices to several motor finance firms over historical sales practices.
The notice raised new concerns over discretionary commission agreements, which were banned in 2021, as the regulator felt they ‘give motor finance brokers/dealers an incentive to raise customers’ finance costs’.
As a result of two recent adjudications by the Financial Ombudsman Service that found firms have been rejecting almost all complaints, the FCA expects a significant increase in complaint volumes in this area.
In response, the FCA intends to conduct a full review of complaint handling. It is expected to issue S166s under powers granted by the Financial Services and Markets Act 2000 to a number of motor finance providers, suspend the eight-week rule for responding to relevant motor finance complaints, and consider next steps for compensation if deemed necessary.
The FCA’s upcoming motor finance review
The key message from the FCA’s commentary is around differences in firm and customer perspectives on discretionary commission arrangements. This is reminiscent of the regulatory work conducted around payment protection insurance, which became a major initiative for the regulator. While it is not possible to size the issue accurately now, the emerging consensus is that it could be similar in size and cost to payment protection insurance.
Motor finance firms should take a closer look at their frameworks and practices, and assess the size of the potential impact of the regulator’s planned work on their own past business.
Post-Consumer Duty implementation, the review is also a real-world case study in the importance of strong oversight. With increased regulatory scrutiny and tighter consumer care standards, spearheaded by the FCA’s ‘show me, don’t tell me’ approach to supervision, firms need an audit trail of client-adviser conversations.
Building an oversight strategy with Recordsure Capture
Customer conversations now take place across desk-based face-to-face meetings, shop-floor discussions and online meetings. Keeping a reliable, secure record of exactly what was said and when has long been a logistical challenge.
Despite the Consumer Duty adding pressure on businesses to deliver clear evidence of their advice process and support good outcomes, many firms still rely on paper-based meeting notes for compliance reporting.
With Recordsure Capture, firms can change the way they record and evidence customer conversations. Recordsure Capture is an app designed to create recordings of in-person and online spoken interactions.
Available for iOS, Windows and Android devices, the tamper-proof tool helps maintain an authoritative record of customer interactions for regulatory reporting and can record without an internet connection. Thanks to patented technology, recordings are automatically uploaded to a secure, searchable web-based portal for review and play back.
Conversation Intelligence modules
With Recordsure Capture, firms can reduce the risk of missing a conversation and maintain high-quality records of in-person and online customer conversations when needed. Conversation Intelligence modules add further oversight and insight into emerging risks.
- Transcribe: auto-generate an accurate text transcript of customer conversations, with transcript word search capability to pinpoint specific terms or phrases.
- Classify: segment conversations by topic so reviewers can complete call reviews in half the time.
- Assure: AI designed for financial services assesses and scores 100% of conversations with 90+% accuracy before a human gets involved, directing reviewers to parts of conversations scored as non-compliant.
Frequently asked questions
The FCA raised concerns about discretionary commission agreements and complaint handling after Financial Ombudsman Service adjudications found firms had rejected almost all complaints.
The FCA is expected to issue S166s to some motor finance providers, suspend the eight-week complaint response rule for relevant complaints and consider compensation next steps if needed.
The FCA’s ‘show me, don’t tell me’ approach increases the need for reliable evidence of what was said in client-adviser conversations.
It supports recording, transcription, topic segmentation and assurance scoring so firms can review conversations and evidence customer interactions more consistently.