Finance warning for dealers
Dealers are being advised to make sure they follow the processes set out by lenders and insurance providers, or risk losing out on potential income from add-on products when selling vehicles.
The warning comes from the Financial Services Federation (FSF) in the wake of the Commerce Commission releasing a report about motor-vehicle financing and related add-on products on November 10.
Lenders offering vehicle finance, insurers and consumers were all spoken to by the commission for its review.
The regulator says feedback suggested some industry participants may be falling short of their legal obligations when selling add-ons, leading to the potential for poor consumer outcomes.
Lyn McMorran, FSF’s executive director, says many of the issues raised in the report will have already been tackled by companies as they prepare for changes to the Credit Contracts and Consumer Finance Act (CCCFA) being introduced on December 1.
She told Autofile Online the commission began surveying some FSF members for the review about 18 months ago and many of those companies will have updated their approach to credit and loans ahead of the new legislation.
“A lot of the issues raised by the Commerce Commission are probably already being addressed,” explains McMorran, pictured.
“Processes are tightening up because lenders, in particular, are on the hook for any breaches of the CCCFA with respect to suitability of the product and some of those issues are already addressed in the way the products are being sold and will be sold beyond December 1.
“Our members have been doing a lot of work with their dealer networks to get them ready for those changes.
“The key thing for dealers is that they really must follow the process that has been put in place for them by the lenders and the insurance providers.
“In the worst-case scenario, if dealers aren’t following processes, then they won’t be able to access products and they would lose that income stream, so it’s in their interests to follow the processes.”
McMorran notes 14 of the 15 companies surveyed by the commission are FSF members and says the report will have given the commission a better view of how their finance and insurance products work.
She adds the research, which she describes as “comprehensive”, will have also focused the attention of businesses on any areas where there may be deficiencies in the sales process.
“Overall, we’re not surprised by the report and the Commerce Commission did not find anything systemic to worry about so that was good and confirmed our views about the industry,” McMorran says.
“What they did find relates back to policies that were sold more than 18 months ago. Everyone is working towards the December 1 CCCFA changes around the suitability of products and if the commission came back and did the research now, they would probably find less to worry about because people have been stepping up to make sure they’re selling products that are fit for purpose and suitable for the consumer.
“We’re having a conversation with the Commerce Commission this month and the question is, where to from here? The report makes no conclusions or recommendations about what it thinks needs to be done.”
The implementation of updates to the CCCFA were initially due to be introduced from October 1 but were pushed back by the government because of the impact of the latest Covid-19 lockdowns.
McMorran says the additional time has been crucial for allowing finance companies to be ready for the new rules, although much of the training of agents and dealers has been conducted remotely.
“The extra two months has made a big difference, although there are still issues with not being able to go out of Auckland and get around branch networks and do face-to-face training with people.
“But we’ve got to do what we’ve got to do. The extra two months has given people more opportunity to test systems and process changes, and I’m not hearing huge concerns about being ready for December 1.”