FCA Rules Every Car Dealer Needs to Know About Offering Finance

Why This Guide Matters

The Financial Conduct Authority (FCA) plays a pivotal role in ensuring transparency, fairness, and consumer protection in the UK motor finance market. For car dealers offering finance, understanding FCA rules isn’t just a legal requirement—it’s a business necessity. Staying compliant helps protect your reputation, avoid costly penalties, and build trust with customers.

Motor finance is a significant part of the car buying journey for many UK consumers. Dealers who navigate FCA regulations effectively can offer better deals, provide clearer information, and create a more positive experience for their customers. This guide will help you unravel the key FCA requirements, so you can approach motor finance with confidence and integrity.

The Basics Explained

The Financial Conduct Authority regulates firms that provide consumer credit, including car dealers who offer finance. Since April 2014, all dealers arranging finance must be authorised by the FCA or act as an appointed representative of an authorised firm.

Here are the essentials:

• Authorisation: Dealers must secure either full or limited FCA authorisation to offer finance products.

• Treating Customers Fairly (TCF): This principle underpins all FCA rules. Dealers must ensure customers are given clear information, fair treatment, and suitable products.

• Disclosure: Dealers must be transparent about their role, commissions received, and the finance products they offer.

• Affordability and Creditworthiness: Assessing whether customers can afford repayments is mandatory.

• Financial Promotions: Any advertising or promotion must be clear, fair, and not misleading.

Non-compliance can result in fines, suspension, or even business closure. The FCA regularly audits firms and expects robust processes in place to protect consumers.

How It Affects You

For car dealers, the FCA’s regulations touch every aspect of offering finance. Here’s how:

• Sales Process: Your team must provide accurate, unambiguous information at every stage. Misleading statements or unclear terms can lead to customer complaints and FCA scrutiny.

• Documentation: From initial enquiry to contract signing, every document must comply with FCA standards. This includes clear explanations of interest rates, fees, and repayment terms.

• Commission Disclosure: You must inform customers if you receive a commission for arranging finance—and explain how it might affect their deal.

• Customer Outcomes: The FCA expects you to consider what’s right for each customer. This includes checking affordability and ensuring the product truly fits their needs.

• Ongoing Compliance: The rules are not a one-off hurdle but require continual review and training. Staff must stay updated on regulatory changes and best practices.

These requirements may seem demanding, but they are designed to create a level playing field and enhance consumer confidence in dealer finance.

Our Approach

At Kandoo, our approach is built around transparency, compliance, and customer-centricity. Here’s how we ensure strict adherence to FCA rules and support our dealer partners:

1. Comprehensive Training

We believe that well-informed staff are the cornerstone of compliance. Our training programmes cover:

• FCA regulations and recent updates

• Treating customers fairly in every interaction

• Identifying and explaining different finance products

• Clear documentation and communication

2. Robust Processes

We implement and regularly review processes to ensure:

• Accurate affordability and creditworthiness assessments

• Full commission disclosure in line with FCA guidance

• Audit trails for each finance transaction

• Consistent record-keeping for regulatory review

3. Technology and Tools

Kandoo uses advanced digital platforms to:

• Streamline compliance checks

• Automate documentation

• Provide real-time updates on regulatory changes

4. Customer Advocacy

We prioritise customer outcomes by:

• Offering impartial advice

• Presenting all suitable finance options

• Ensuring agreements are fully understood before signing

5. Ongoing Support

Our compliance team is always available to answer queries, deliver refresher training, and update processes as FCA rules evolve.

“Compliance isn’t just a box to tick—it’s a culture that benefits customers and businesses alike.”

Before You Decide

Before offering finance, consider these vital steps:

• Obtain Proper Authorisation: Ensure your FCA status is up to date. If in doubt, seek guidance from a compliance consultant.

• Review Your Processes: Audit your sales and documentation procedures for any compliance gaps.

• Train Your Staff: Don’t assume everyone knows the rules. Regular training is essential.

• Monitor Your Marketing: Check all adverts, social posts, and emails for compliance with FCA rules on financial promotions.

• Stay Informed: The FCA updates its rules regularly. Subscribe to updates and attend industry webinars.

Taking these steps before you offer finance can protect your business from costly mistakes and reputational harm.

What’s Real, What’s Hype

There’s a lot of talk about FCA compliance, but not all of it is accurate. Here’s what’s real:

• Real: FCA audits are thorough and can happen with little notice.

• Real: Non-compliance can lead to heavy fines and business closure.

• Hype: Compliance is impossible for small dealers. In reality, with the right systems and support, any size business can achieve it.

• Real: Customers are becoming more aware of their rights, so transparency is non-negotiable.

Ignore the myths—focus on building a culture of compliance.

Pros & Cons

A table summarises the main advantages and challenges of FCA compliance:

While compliance adds complexity, the benefits for your business and your customers far outweigh the drawbacks.

Other Options to Consider

If you’re concerned about the workload or complexity of direct FCA authorisation, there are alternatives:

1. Appointed Representative Model

   • Partner with a principal firm (like Kandoo) who holds FCA authorisation.

   • You act as their representative, reducing your regulatory burden.

2. Broker Partnerships

   • Work with a specialist finance broker to handle compliance and customer finance arrangements.

3. Outsourced Compliance Support

   • Engage compliance consultants to manage your policies, training, and audits.

Each option has pros and cons. The best path depends on your business size, resources, and appetite for direct regulatory engagement. Partnering with experienced firms often allows you to focus on sales while maintaining high compliance standards.

FAQs

Do I need FCA authorisation to offer car finance?
Yes. If you arrange or advise on consumer credit, you must be authorised or be an appointed representative.

What are the risks of non-compliance?
Risks include fines, suspension, and public loss of trust. The FCA can also ban you from offering finance.

How often do FCA rules change?
While core principles remain, the FCA updates specific rules regularly to address market developments. Staying up to date is crucial.

Do I have to disclose my commission?
Yes. Since January 2021, full commission disclosure is mandatory, including how it impacts the finance deal.

What’s involved in a compliance audit?
Audits review your processes, documentation, sales practices, and training records. They may include interviews and mystery shopping.

Can small independent dealers comply easily?
Yes, with the right systems and support from compliance specialists or brokers.

What happens if a customer complains?
You must have a clear complaints process. The Financial Ombudsman Service can intervene if issues aren’t resolved.

Where can I get help?
Trade bodies, compliance consultants, and specialist brokers like Kandoo offer guidance, training, and ongoing support.

Next Steps

If you’re a car dealer considering offering finance, review your current FCA status and compliance processes. Invest in staff training, seek expert guidance if needed, and partner with an authorised broker if you prefer a lighter regulatory load. Compliance is an ongoing journey—start with the right steps and keep your business future-proof and trusted.