- February 20, 2020
- Posted by: John Swift
- Category: Automotive Industry
The motor trade has again been warned to tighten up its act after the Financial Conduct Authority stepped in at two businesses this week, fining one more than £2.75 million for events several years ago and ordering another to take down online adverts.
Finance house Moneybarn, which mainly lends to sub-prime borrowers, was the first in the FCA’s sights which said it didn’t give a reasonable chance for some of its customers to clear their outstanding debt after getting into financial problems. It imposed a fine of £2.77 million.
Referring to the period between April 1, 2014 and October 4, 2017, the FCA ruled that Moneybarn did not explain or communicate the likely financial consequences to customers of missing payments in a way which was clear, fair and not misleading. More than 1,400 customers subsequently defaulted after entering into unsustainable short-term repayment plans.
Moneybarn did not dispute the facts, for which it received a 30% discount in the fine, and has voluntarily paid more than £30 million to all 5,933 customers potentially affected by these failings without requiring them to demonstrate they have suffered any financial loss.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
“Moneybarn did not give its customers, many of whom were vulnerable, the chance to clear their arrears over a realistic and sustainable period. It also did not communicate clearly to customers, in financial difficulty, their options for exiting their loans and the associated financial implications, resulting in many incurring higher termination costs. These were serious breaches.
After discussions with the FCA, Moneybarn voluntarily paid more than £30 million in redress to customers potentially affected by its failings. The FCA gave Moneybarn significant credit for this in assessing the size of the penalty imposed.”
We will not hesitate to take action – FCA
Two days later it banned some adverts on the Rix Motor Company’s Instagram account and on three of its websites. The FCA found that representative examples of the cost of credit to the consumer were either missing or unlikely to be seen, the advert didn’t make clear whether consumers were dealing with a credit broker or a lender and the advert didn’t specify the legal name of the firm as it appears on the Financial Services Register so consumers could easily check that Rix Motors was authorised.
Under the rules, all financial promotions must be clear, fair and not misleading, including those on social media.
Jonathan Davidson, FCA Executive Director of Supervision (Retail and Authorisations), said:
“When customers are buying a car on finance it is really important that they are able to understand how much is going towards the finance and how much is being spent on the car. They always have the choice to get the finance separately, so knowing how much it costs allows them to make informed decisions about whether they are getting the best deal.
We will not hesitate to take action where we see adverts that don’t allow customers this clarity.”
Rix has now withdrawn the adverts and has been told not to breach these rules again The FCA previously raised concerns with the company about its online adverts in 2017 and 2018, which Rix addressed.
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