Leading the way in Finance Standards with Specialist Automotive Finance (SAF)

  • Jun 28, 2024

The Finance & Leasing Association (FLA) is the leading trade body for the asset, consumer, and motor finance sectors in the UK. In 2007, the FLA introduced Specialist Automotive Finance (SAF) to enhance the standard of finance information provided in showrooms and online, benefiting customers.

In 2017, the Financial Conduct Authority (FCA) announced an exploratory review of the motor finance sector. It wanted to understand the use of motor finance products and assess the sales process employed by firms and whether the products could cause consumer harm.


The Review Process

The review focused on four key areas:

  1. Customer information: The FCA undertook 122 mystery shops of dealerships and brokers to see if the information provided to consumers was sufficiently clear and transparent. The FCA were testing to see if customers were presented with the risks and features associated with finance products.
  2. Commission arrangements: The FCA analysed commission agreements and data provided by lenders. It wanted to see if commission provided by lenders to dealers incentivised behaviours that led to consumer harm. For example: higher APRs and the sale of products that did not meet the customer’s needs.
  3. Responsible lending: The FCA undertook a survey of lenders and analysed data from the Credit Reference Agencies. It assessed the extent to which lenders were checking that customers could afford the motor finance being offered and were creditworthy enough to meet the monthly payments.
  4. Unfair business practices: The mystery shops were also used to establish if dealerships were using any unfair business practices to sell motor finance to customers.


Final Findings

In March 2019, the FCA issued its final report. The key findings were as follows for the key areas:

  • Customer information: The mystery shopping results raised a number of concerns about the pre-contractual information (PCI) and explanations provided to consumers and when and how commission is disclosed.
  • Commission: The FCA found that commission arrangements that provided control to dealers and brokers to set interest rates led to increased costs for consumers.
  • Responsible lending: Some issues were found with the way in which lenders assessed affordability and creditworthiness. Firms were asked to revisit their lending criteria to ensure it complied with the FCA’s new responsible lending rules.
  • Unfair business practices: The FCA’s review did not highlight any widespread evidence of other poor practices.


New Rules on Commission and Commission Disclosure

The FCA has consulted on new rules to prohibit commission arrangements that enable dealers and brokers to change interest rates on credit products. The existing rules on customer disclosure, including commission disclosure, will also be updated. The new rules are expected to come into effect from mid-2020.


What’s Changing In-Line with Consumer Duty?

Historically, SAF was an industry standard, but not a mandated qualification. However, with evolving regulations in our sector, a new provision has been added to the FLA’s Lending Code. This aims to further raise professional standards and support compliance with the FCA’s new Consumer Duty. As a result, FLA members can now only arrange finance through intermediaries (dealers and brokers) that are SAF Approved or accredited under an equivalent training and competence scheme.


What is SAF and When Do You Need Approval?

SAF is an initiative designed for intermediaries (dealers and brokers) to gain comprehensive knowledge of vehicle finance, enhance their expertise and credibility, and boost customer confidence. It has been confirmed that all independent used vehicle dealers must become SAF Approved or equivalent by 1 January 2025.


What Should Motor Dealer Do?

If you are not already SAF Approved, it’s crucial to start looking for training companies that offer SAF accreditation well in advance of the January 2025 deadline.


Our Commitment at Autoguard Group

At Autoguard, we’ve committed to excellence by putting all our agents through SAF accreditation training for the second year running. This ensures we gain formal recognition for our extensive motor finance knowledge, adding further value to our dealer partners. We are excited to continue our partnership with Catalyst, who are approved by the FLA as SAF equivalent. All training is delivered via their award-winning platform, enabling us to stay current with key compliance requirements throughout the year. This dedication ensures we consistently deliver an outstanding customer experience.