Car Finance Firms Show Progress Under FCA Consumer Duty
FCA's second-year Consumer Duty review reveals car finance firms are improving customer outcomes. Third cycle of board reports approaches as regulator pushes for better value.
Car finance companies and other financial firms are making genuine progress in protecting customers under the FCA's Consumer Duty rules, according to the regulator's latest review.
The Financial Conduct Authority's assessment of second-year Consumer Duty board reports shows firms are "continuing to mature" in how they use customer data to understand experiences and deliver fair outcomes. This directly impacts car buyers using hire purchase, PCP deals, and personal loans to finance their vehicles.
The Consumer Duty, which came into force in 2023, requires all financial firms to prove they're delivering good outcomes for customers. Crucially for car buyers, this means lenders must show their products offer fair value and that customers aren't being harmed by poor communication or unsuitable deals.
Real Changes for Car Buyers
The FCA reports that Consumer Duty scrutiny has led firms to "design better products, communicate more clearly and support their customers better." For car finance, this translates into clearer explanations of PCP balloon payments, more transparent APR calculations, and quicker resolution when things go wrong.
Board-level oversight means senior executives are now directly accountable for customer outcomes rather than just profits. The regulator notes that boards are "more actively shaping and scrutinising" customer experience work, leading to faster fixes when issues arise.
What This Means for Your Wallet
The improvements matter because car finance is often the second-largest financial commitment after mortgages. Under Consumer Duty rules, lenders must prove their products offer fair value - not just competitive rates, but genuine benefit considering the total cost and customer circumstances.
Firms now face annual reporting requirements where they must demonstrate what their monitoring found about customer outcomes and what actions they're taking. This creates a paper trail that regulators and customers can scrutinise.
Third Cycle Approaching
With the third cycle of Consumer Duty board reports "on the horizon," the FCA is pushing firms to ensure their reporting remains "genuinely outcome-focused" rather than box-ticking exercises.
The regulator's assessment suggests the Duty is working as intended, creating cultural change within financial services that benefits customers through better products and clearer communication. For car buyers, this should mean fairer finance deals and better support when problems arise.
The focus on customer outcomes represents a fundamental shift from the previous approach where firms could largely self-certify their conduct. Now, boards must actively prove they're delivering good results for customers or face potential regulatory action.
Consumers experiencing problems with car finance should contact the Financial Ombudsman Service, which can investigate complaints and order compensation where firms have fallen short of Consumer Duty standards.
