DEALERSHIPS will next month need to comply with the Financial Conduct Authority’s new Senior Manager’s and Certification Regime (SMCR).
As consumers rely almost completely on PCPs, PCHs or other hire purchase agreements to purchase new vehicles, this means that nearly all new car sales and approved used outfits are going to have to comply by 9th December.
SMCR is arriving hot on the heels of the regulator’s final report on motor finance sales practices which indicated that from next year when final rules are published, motor finance sales commissions linked to interest rates– so called Difference in Charges arrangements – will, in all likelihood, be banned outright.
The new SMCR appears to go deeper still – driving to the heart of Finance and Insurance sales practices and standards by demanding that dealerships offering motor finance roll out widespread management and cultural changes to stamp out all practices which disincentivise fair treatment of customers.
SMCR is also about ensuring the staff designated to offer F&I products have the right levels of competence to do that job.
The regulator is also demanding senior management checks are carried out to ensure these competent employees are doing their jobs correctly and have up-to-date skillsets and training.
To ensure everything is being done correctly the FCA is promoting it five key principles of good conduct as follows:
- You must act with integrity
- You must act with due care, skill and diligence
- You must be open and cooperative with the FCA, PRA and other regulators
- You must pay due regard to the interests of customers and treat them fairly
- You must observe proper standards of market conduct
The FCA wants SMCR to be a catalyst for cultural change, encouraging greater accountability for individuals responsible for selling consumer finance products, and setting a new standard for personal conduct.
So, everyone selling F&I products in your dealership will need to do the following routinely:
- Complete a Statement of Responsibility (SoR) which will need to be updated at least annually and be ready to be checked by the FCA should they decide to conduct a review of the market.
- Keep skills up to date with hours of Continuous Professional Development (CPD) learning logged and certifications like the Institute of Motor Industry’s (IMI) Finance & Insurance accreditation duly passed and noted on employees’ competence logs.
- Senior management need to consider gradually changing their employee pay and benefits packages – moving progressively away from basic salaries and high sales-based commission models to higher basic salaries with commissions geared to ‘treating customers fairly’ indicators and perhaps evidence of ‘wowing’ customers with great customer service which also keeps them coming back and recommending them.
In this way, relationships with customers are likely to be stronger and dealer reputations stand the test of time as new waves of professionalism start to impact the way dealerships operate across the board.