The Financial Conduct Authority is conducting spot checks on car dealers to ensure they are not falling foul of rules.
The point of sale check ups started this month and are designed by the city watchdog to ensure dealers are complying with rules on disclosing commissions.
Lawgistics has warned that the FCA might not just focus on big dealer groups where there could be ‘easy wins’ and instead could target car dealers of all sizes.
Legal advisor John McDougall said dealers should focus on ensuring they are ‘prominently’ disclosing the nature of all commission arrangements that they have with their lenders.
He also said dealers should ensure their website has a suitable commission disclosure statement too.
He warned that the manner in which showroom staff deal with their customers will also be under scrutiny to ensure they are ‘treating them fairly’.
McDougall said: ‘It could be assumed the FCA will pick on the “big players” as that will have the desired impact if they need to hand out any enforcement notices for noncompliance.
‘Now, you could be one of the lucky ones and not be mystery shopped, but do you want to run that risk?
‘Any reputable lender would have been in contact with their dealer network to ensure compliance.
‘However, we live in the real world and during these unprecedented times, it may be a good idea to ensure that you, as a motor trader, are fully up to speed.’
The rules on disclosing commission changed at the start of the year and lenders have a responsibility to ensure compliance in their dealer networks too.
Lawgistics suggests it is sensible for dealers to contact their lending partners to ensure they are disclosing the correct information and following the rules.
McDougall added: ‘With the FCA’s guidance and rules not always being an easy read, your lender sending out a couple of emails regarding commission models and disclosure changes back in January, when the rules came into force, is probably not sufficient to ensure your compliance.’
This is the second time in a year that the FCA has targeted car dealers to check for compliance but the first time it has focussed on commission disclosure.
Last year, Car Dealer reported on similar checks being carried out on those selling finance and experts from Automotive Compliance warned then that dealers need to be on top of their training.
Paul Guy, Automotive Compliance director, said an investigation could ‘open up a can of worms’ and warned dealers to ensure their staff are giving customers robust information.
He said: ‘The concern for dealers would be that should the mystery shop highlight an area of concern in one particular area, the FCA is then duty bound to act upon this and review.
‘If you have a process that relies on everything being done at handover, obviously this is not the correct procedure anyway, and this is not going to work as I’ve never seen a mystery shopper get to handover before.’
- Join our breaking news WhatsApp group
- Listen to the latest Car Dealer Podcast
- Car Dealer Used Car Awards are back for 2021 – enter today
The post FCA spot checks targeting dealers to ensure commission rules are being followed appeared first on Car Dealer Magazine.