Benefits of the Human Touch, Part 1: Transparency

Set to come into force from January 28 2021, the Financial Conduct Authority’s ban on all discretionary commission models in motor finance has massively raised its expectations of lenders. The FCA believe the ban will save car buyers ￡165 million-per-year and eliminate “conflicts of interest” in the sector.

Christopher Woolard, the FCA’s interim chief executive, said: “By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers.”

The FCA said that, during the course of its investigation into motor finance, those contesting its plan to implement a ban on discretionary rates said that a ban would penalise those firms that use these commission models to deliver a customer benefit – the Reducing Difference in Charges (reducing DiC) model.

But the FCA concluded that an outright ban would be the "most effective way of addressing harm". Its report, published on July 28 2020, said: "While some firms may feel comfortable that they can operate these commission models responsibly, they still present brokers with an incentive to charge customers more."

Commenting on the FCA’s announcement, Adrian Dally, head of motor finance at the FLA, said: “This is a welcome announcement from the FCA as it provides clarity for the industry.”

As part of the changes made by the FCA, it has also amended its guidance related to commission disclosure. CONC 3.7.4G now makes clear that firms should disclose the nature of commission in their financial promotions (as well as when making a recommendation). The FCA said that the guidance clarifies that firms should consider the impact commission could have on a customer’s willingness to transact and that firms should consider how much commission can vary depending on the lender and tailor their disclosures accordingly.

CONC 4.5.3R clarifies that the existence and nature of commission arrangements where the commission varies depending on the lender, product or other permissible factors should always be disclosed prominently. The disclosure must also cover how the arrangements could affect the price payable by the customer.

The FCA said: “We believe our changes will make it more likely that consumers get timely information. In turn, this should increase (consumers') ability to make more appropriate decisions."

The FCA’s ban was designed to impose consistency and transparency on the auto finance industry, thereby restoring power to the customer. This means customers can make financial decisions in a spirit of honesty and transparency, creating better outcomes for both lenders and customers. The essence of the new directive is that prioritizing the customer and their needs is good not only for customers, but the whole auto finance industry.

Swift Asset Services: the Caring Collector

While the FCA ban is commendable – and a welcome shake up for the auto finance industry – Swift Asset Services have been putting the customer first for almost a decade. We have always found that a customer-focused approach is simply the best way to get positive results, even in the most difficult circumstances.

This distinctive approach has always defined our flourishing business, at the deepest structural level. We incentivize our field agents to pursue connection and repayment above recovery, which is only seen as a last resort. Payment is a win-win solution that benefits both the client and above all, the customer.

A common problem in debt recovery is treating all customers the same way, as cogs in a debt machine. Unsurprisingly, it results only in frustration for agents and angry resistance from customers. By treating every customer as an individual with a unique set of needs and requirements, Swift apply strategic customer management to improve agent success and deliver an improved – and highly personalised – customer experience.

Benefits of the Human Touch

Swift don’t believe in management fads or trendy jargon, just a simple desire to put the customer first. Because we nurture this honest, caring approach, everything else we do automatically falls into place. Achieving 78% success rates on all Phase 2 recoveries – often cases other agents have long since given up on – is clear proof of this. We cannot reveal all the secrets of our success, in any great detail; but prioritisation of the customer is central to them all.

As the FCA ban makes clear, transparency with the customer is the new watchword in auto finance. Clearly, the highest authorities want to centralise the importance of honesty and integrity, values that Swift Asset Services have always held dear. Avoiding confrontation and aggression and emphasising the human touch also makes good business sense for our clients, saving huge amounts on admin and legal costs.

‘Swift Asset Services – A Safer Pair of Hands’