Motor Finance – Planning Ahead

Motor Finance – Planning Ahead

In eight months the Financial Conduct Authority (FCA) will announce its conclusions on its current review into motor finance discretionary commission arrangements (DCAs). At that point there will be a decision on whether there will be a need for an agreed redress methodology or an industry-wide consumer redress scheme. The industry will have greater clarity on where customers have been deemed to have received poor outcomes, the ‘in scope’ date range that the FCA expects to be reviewed and timelines for undertaking review and redress activity. 

Whilst eight months might feel like a considerable period of time, and many firms are busy dealing with the growing operational challenges of pausing complaints, we would recommend that firms start to think ahead and plan for any remediation activity that is to come.

Establishing a designated DCA programme, and appointing an experienced Programme Manager or remediation partner, is crucial to separate this activity from ‘BAU’ complaints and information requests. This team can manage your current operational challenges with dedicated resource, to prevent impact to your existing SLAs. Defining your key stakeholder group, and setting up a working group with a wider governance structure, will also help you prepare for any subsequent activity. 

There are four pillars to Huntswood’s approach to remediation, and firms can start making progress on the first three.

The coming months gives time for firms to plan ahead, seek advice and leverage experience from their previous remediation activities.

Pillar 1 - Understanding the issue

• Data gathering across the review period to ensure you have:
  • Copies of broker arrangements
  • The discretionary commission ranges
  • Volume of sales and commissions paid across each period
  • Copies of documents providing disclosure to customers
  • Any further documentation provided to brokers in the form of guidance or training.
• Undertake independent file reviews across the time period to understand the circumstances of the sale for individual customers taking into account recent FOS decisions and FCA requirements. Consider proactively contacting customers on some of these reviews to understand what they would have done if information disclosure had been different.
• Analyse the data and independent file reviews across the period to identify different ways to cohort the population. Rule out periods in time where discretionary commission arrangements were not in place, and identify the varying levels of adherence to regulatory requirements.

Pillar 2 – Population identification and interrogation

• Based on understanding the issue, retrieve customer level data across all population cohorts that may require review and/or redress.
• Undertake some analysis to support initial provisioning where you are able to apply FOS redress outcomes to certain segments leveraging the independent file reviews that were conducted.
• Identify data required to run potential redress calculations and ensure it is retrieved at an individual customer level. Identify data gaps and look for alternatives to close them.
• Based on current knowledge of your customer population, consider characteristics or circumstances that might warrant prioritisation ahead of other customers.

Pillar 3 – Remediation design

Where you have cohorts within the population that closely align to findings from the FOS, or you believe will warrant redress, proactive steps can be taken to create options for upcoming remediation activity. This enables you to leverage the very best options in terms of skilled resources and technology, to generate solutions that will deliver the right customer outcomes efficiently and cost effectively.

Further information on the different aspects of our remediation design is contained in the link below to download and read our full brochure.

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