Complyport, a leading compliance and regulatory consultancy has warned automotive finance lenders and motor dealerships to ensure they are complying with FCA guidelines on lending and new regulations in the wake of the COVID-19 crisis.
Changes include the FCA accepting digital signatures on loan agreements; more online meetings with clients, which will require verification methods of income, address and affordability of loans and agreements to have inbuilt rigour and to be compliant with current legislation.
Complyport has warned that electronic and digital processes must still fulfil existing legal requirements. The FCA recently confirmed it would accept electronic signatures for fund-related applications and on all applications from mutual societies.
The FCA has stated that appropriate steps need to be taken onboard to minimise the risks involved with using electronic signatures, especially those which may impact a firm’s responsibility to treat customers fairly with due care.
The FCA said: “Firms should consider the client’s best interests rule and the fair, clear and not misleading rule to ensure that, when a client signs a document electronically, this does not make it more difficult for the client to understand what they are agreeing to.”
Paul Grainger CEO of Complyport Ltd commented:
“The COVID-19 crisis has meant that we have lost the ability to have physical 1-1 meetings to check applications and explain the implications of legal agreements entered into by customers. However, automotive finance lenders and motor dealership staff dealing with loan finance must still ensure that in the new “norm” of digital meetings and electronic transactions, the finance process is compliant with FCA requirements. Firm’s must fully consider the legal position around the use of electronic signatures and, indeed, around other associated areas such as explicit consent needed in the processing of certain data.”
“So we would expect firms to review their processes and procedures. We expect firms to take a pragmatic approach to adapting process and procedures to facilitate the provision of suitable advice and transactions for their customers, whilst ensuring they remain compliant with FCA requirements..”
Paul Grainger CEO Complyport Ltd further noted:
“Complpyort has warned firms that where firms do move from wet-ink to electronic signatures, they should monitor data including conversion rates, cancellations and complaints.”
The FCA has also provided guidelines in a 3-months payment freeze to customers that are facing financial difficulties in meeting their finance or leasing payments due to coronavirus and suggests firms not to end any agreements or repossess vehicles.
Firms may fairly adjust the terms of a contract affected by coronavirus if needed. Firms should not use temporary depreciation of car prices to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. They should offer to the affected customer appropriate solutions in case they wish to keep their vehicle at the end of their PCP agreement but cannot cover the balloon payment due to financial difficulties caused by the coronavirus.
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Notes to Editors:
- Complyport is a leading compliance and regulatory consultancy providing bespoke, practical solutions for all manner of regulated firms both in the UK and overseas. Our specialist compliance services expertise can either sit alongside your current compliance teams or, for an independent solution, we can bring our team in-house.
- Established in 2002, Complyport combines former regulators, industry practitioners and legally qualified individuals to offer our clients an unparalleled, professional team.