Britain’s £40 billion car finance industry may be heading towards a mis-selling scandal amid concerns lenders are rushing buyers into deals they may not be able to pay back.
The Financial Conduct Authority (FCA) announced it will begin investigating “irresponsible” lenders after revealing it was “concerned” about a lack of transparency in the market. The watchdog said some buyers, particularly poorer customers, may be paying too much for their car finance and there are also concerns about the so called ‘sub-prime’ finance market where car buyers with bad credit ratings are given car loans without the proper checks. Lenders found to have mis-sold finance could face millions in penalties.
Consumer credit finance has surged over recent years, with the boom in PCP finance deals in part fueling UK car sales growth. Finance now accounts for the highest share of that growth with around 86 per cent of new cars now bought on finance.
“The majority of customers have no idea who their financing contract is with, even though the rules state the buyer has to know who they are dealing with, along with everyone else involved in the chain.”
The FCA said: “We are concerned that there may be a lack of transparency, potential conflicts of interest and irresponsible lending in the motor finance industry.
At Balanced Funding Solutions, we have always been transparent with how we deal with our customers, that’s why we enjoy high levels of repeat and referral business.
We work with our customers to find out their needs and then tailor the finance product to fit them. No surprises, no issues and finally we do not incentivise customers, unlike many manufacturers, to make ill-informed and incorrect decisions when buying a car on finance.