IMI Magazine

Are you TCF compliant?

I recently asked a dealer how they measured their compliance and they responded with “well we must be compliant, we never get any complaints”.

“Eh, you don’t quite get it, do you?” I suggested.

We’re three years into regulation now and everyone’s getting used to what they have to do. Give customers proper information. Analyse their needs. Present the appropriate products. Ensure that every deal file has a ‘demands and needs’ statement. Back all this up with training for staff and ensure that processes and procedures are in place – including a complaints procedure and, of course, the all important half yearly Retail Mediation Activity Report.

Then, just as you thought it was safe to go back into the showroom, along comes another initiative from the Financial Services Authority – Treating Customers Fairly. “But what’s the big deal?” we hear you cry. “We do that already. We pass all brand standards, we’ve achieved ISO 9000+, we get few complaints, we don’t hold onto deposits – what else must we do?”

Well, in typically vague regulatory style, the FSA doesn’t specify what you must do beyond stating that “it’s central to the delivery of our retail agenda, as well as being a key part of our move to more principles-based regulation”.

As an ‘authorised firm’, you are expected to interpret this for yourself. Your finance company will provide as much help and support as they can but this is limited too, for a couple of main reasons:

• They have their own regulatory obligations to meet.
• They don’t have the knowledgeable resources to advise dealers, and even if they did it represents too much of a risk on their professional indemnity insurance to give specific advice (as a dealer you do have your own PII, don’t you?).

So, here goes at providing a short dealer guide to TCF.

The FSA, as outlined earlier, is moving away from detailed rules in some areas and moving towards a reliance on “principles and outcomes”, i.e. high level rules rather than detail. TCF’s objective is “for firms to put customers at the heart of their business, to help build consumer confidence in the financial services industry” (and, yes, that does include dealers, even though they are secondary intermediaries).

Perhaps it’s helpful to establish what “fairly” means; something along the lines of ‘what you’d want done to you – or not done!’

Have you ever asked your customers whether they felt fairly treated? Post-sale surveys will help you measure it.
Dealers need to deliver on six key outcomes to fulfil FSA criteria:

• Confidence that firms have fair treatment of customers at the centre of their corporate culture.
• Products are designed and sold and targeted to meet the needs of identified groups.
• Consumers are provided with clear information and kept appropriately informed before, during and after the point of sale.
• Advice is suitable and takes account of customer circumstances.
• Products perform as described and to an acceptable standard.
• No unreasonable post-sale barriers are imposed to switch products, providers, or to lodge a complaint or make a claim.

In short, TCF must be evident across all parts of business – with ‘evidence’ being the key word. As at the end of March, firms should have management information (MI) in place to test the outcomes. By the end of December, they are expected to demonstrate that they are consistently treating customers fairly.

But what does all that look like for a motor dealer? You’ll need to examine your ‘culture’, from management support to MI and staff buy-in. You need to ensure your processes are adequate and consistent and check that rewards are not too heavily weighted towards quantity rather than quality. Pleading lack of resources will not wash with the FSA, so make it a priority.

And, finally, try not to regard the latest FSA edicts as just another round of pettifogging interference. Treated in the right spirit, they should lead to one tangible outcome – more cars sold to more (happy) customers for more profit!

Stephen Whitton MIMI is a director of SSW Performance Solutions and SSW Associates, which specialise in F&I compliance. www.sswperformancesolutions.com 01908 507799