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Six more FCA compliance tips for asset finance brokers

Monday marks the start of the FCA Consumer Duty regulation. Having helped around 20 smaller broking firms to prepare for it (taking the opportunity to carry out a wider health-check of their FCA compliance) here’s a list of some common points of discussion that might help other small broking firms.


This post is intended to build on my earlier post relating to Consumer Duty, Six actions to help asset finance brokers look on the bright side of Consumer Duty, my Linked In post on how Consumer Duty should help address the issue of car dealerships refusing to cooperate with brokers, and various other articles on my website and LinkedIn. So it doesn’t repeat the points already made.


1. Rethink your use of Appointed Representatives (ARs). Some brokers have unnecessary ARs. Could they be made Introducer Appointed Representatives (IARs) instead? Could they be individuals working under a contract of services? Or maybe the time has come to part company? ARs (not IARs - they are great - go sign them up!!) can be risky and time-consuming, so they are fine for larger firms, but often not ideal for smaller brokers.


2. Check your senior managers. When the Senior Managers’ regime started, the FCA helpfully converted existing Approved Persons. Some brokers haven’t updated their Senior Managers since then. It’s important, and fairly simple, to keep this up to date.


3. Update pre-contract disclosures. It’s always been useful to issue a ‘pre-contract disclosure’ to new customers. Many brokers are still using the version that came out of the original Hitachi FCA workshops in 2016 and was also supported by Aldermore. That was fine at the time (full disclosure: I wrote it!). But things have moved on and it’s important to have an up-to-date version, including the latest commission disclosures and up-to-date information about products.


4. No, you don’t need professional indemnity insurance! The FCA has recently written to firms, saying that they must have ‘compliant PII’ in place covering their ARs and IARs. It's interesting to consider whether this letter meets the FCA's own requirements for 'clear, fair and not misleading' communications! PI cover isn’t required for credit brokers, so it’s also not required for brokers' ARs and IARs.


5. Avoid the zero-volume trap. Brokers that report two consecutive years of zero regulated volume are starting to receive quite alarming ‘Notice of Enforcement Action’ letters from the FCA, threatening enforcement action to cancel their FCA permissions. It’s just the FCA’s friendly way of saying ‘use it or lose it’. Remember to report all regulated broking activity, no matter whether it results in an agreement, to avoid this problem.


6. Keep your own file notes. Many brokers submit copious notes to lenders for each deal on the lenders’ portals, but don’t keep their own separate notes. With the new consumer duty rules, that's probably now quite risky. There's no need for lots of details, but keeping a few key points about the customer's needs and how they were met could be valuable.


My consumer duty implementation support service, priced at a fixed £250 + VAT, is still available, and covers all of the above points and much more. Also happy to offer ongoing regulatory support to brokers on an hourly rate basis, call me for details.

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