Navigating the UK’s Regulatory Environment for Car Finance Brokers
The Financial Conduct Authority, as part of the Bank of England, are the financial regulator who control the rules surrounding car finance and dictate what regulations companies need to adhere to. Failure to meet these aforementioned regulations can result in expensive litigation and a loss in customer trust: Consumers, brokers and lenders alike need to be clued-up on what’s what.
Overview of the UK’s Car Finance Market in 2024
The UK economy has weathered a great deal over the last 5 years: COVID, the cost of living crisis, Russia’s invasion of Ukraine and more recently, a general election. Throw amongst this numerous changes to car tax, road law and pie-in-the-sky EV targets, the car finance market has taken a significant beating. The Finance and Leasing Association carried out research that suggests that the number of people buying a both used and new vehicles on finance is down anywhere between 7% and 13% compared to 2023.
Against this difficult backdrop – car finance brokers need to adapt, making their offerings more appealing to consumers. For example, at Magnitude we negotiate bespoke finance packages through our Concierge Service. In order to do this, a detailed understanding of financial regulation is required.
Understanding the Regulatory Landscape
Key Regulatory Bodies Governing Car Finance in the UK
What is the Financial Conduct Authority (FCA)?
The FCA is one of three major regulators of financial markets in the UK. The FCA determines how business should carry out their affairs – whether it’s in regards to firms and their advertising, fraud prevention and even have the powers to freeze business assets.
What is the Prudential Regulation Authority (PRA)?
The PRA sets rules for individual businesses, and is responsible for the safety and stability of financial services in the UK. The PRA action any concerns raised to it by the Financial Policy Committee.
What is the Financial Policy Committee (FPC)?
The FPC monitors the UK economy, and identifies trends or firms that require attention from the PRA and/or FCA.
All three of these bodies are constituent parts of the Bank of England, who set the base interest rates, which affects high-street banks, finance lenders and brokers too.
Legislation Affecting a Car Finance Broker
As a borrower, it’s important to understand the legislation that your car finance broker has to follow.
Consumer Credit Act 1974 (/2006)
The Consumer Credit Act protects borrowers that take out Personal Loans, Hire Purchase agreements and Credit Cards – including the right to withdraw, the right to review your credit file from a Credit Reference Agency and offers protections for credit card purchases between £100 and £30,000.
General Data Protection Regulation
GDPR initially came into effect in 2018 as EU legislation. Following the UK’s exit from the EU in 2020, GDPR was merged into UK Law and carried over the same rules and regulations, including:
- The right to object to processing, or to request we process your personal data for limited purposes
- The right to have personal data removed from records
- The right to have the details of your personal data amended
- The right to request a review of any data held about you
- The right to be provided with copies of personal data held
General Data Protection Regulation sits alongside the updated Data Protection Act 2018, and concerns how data is treated by car finance brokers and other parties.
You can read our Magnitude’s Privacy Policy here: https://magnitudefinance.com/privacy-policy/
Electric Vehicle Regulation
At Magnitude, we’ve seen new rules come and go over our 35 years. Over the past decade, interest in electric vehicles has increased at a huge rate. The UK Government are targeting 2035 as the date for 100% of new vehicles sold to be electric, this is soon to change to 2030. For further information, visit gov.uk.
Magnitude Finance’s Commitment to Compliance
As a leading car finance broker in the UK, we support drivers get behind the wheel of their dream car. We’re not a finance company, but we’re still bound by the same rules and regulations. Whether you’re applying for Personal Contract Purchase, Hire Purchase, or a completely bespoke finance agreement, we take all the essential steps to ensure you’re protected.
The Future of Car Finance Regulation in the UK
Going forward, the Financial Conduct Authority has extended its changes to motor finance complaints, with many eyes looking at the industry with intrigue. We’d anticipate changes in 2025 on how car finance brokers can and cannot offer personal contract purchase or hire purchase agreements; and who knows, under a new government, an undoing of Brexit may result in legislation changes once again.