UK dealer group Lookers is being investigated by the Financial Conduct Authority over the company’s sales processes for regulated activities.
The investigation will focus on the period between January 2016 and June 2019 and follows disclosure in the company’s 2018 annual report and accounts of the need for review of some areas of the business subject to regulation by the FCA.
In a statement, Lookers said it was “co-operating fully” with the investigation and that “at this stage, the company cannot estimate what effect, if any, the outcome of this investigation may have”.
The statement added that adapting to developments in regulation affecting the motor retail industry and the fast pace of change of customer demands and behaviours is a “key challenge and an important priority for the group”.
Last year, the Lookers board commissioned its own independent review of the group’s internal control, risk assurance systems and internal audit.
This review was shared with the FCA and indicated that there were some control issues in the sales process in the group’s regulated activities, which will require an improvement plan to be implemented.
The Lookers statement added: “We have invested in both our internal capabilities and external advice. The project will be completed and agreed actions will be implemented as soon as possible.”
Shares in Lookers, named as the AM100’s number two UK franchised dealer by turnover last week, tumbled following the announcement and are now trading at roughly half their value compared to the start of the year.
Lookers chief operating officer Nigel McMinn told industry magazine AM: “We commissioned our own investigation to ensure that we were being as compliant as we could be and now we will work closely with the FCA and cooperate and comply with them in any way they see fit.
“We see this process as an opportunity to sharpen up the business and emerge in a more robust and compliant form that will benefit us and our customers in the long term.”
The announcement of the FCA investigation comes amid a growing focus on regulated activities in the motor industry following the final publication of the regulator’s Motor Finance Review.
The recent IAFN Consumer and Business Auto Finance Regulatory Forum 2019 looked in detail at the legal implications of the report, along with the importance of compliant communication and correct organisational structures for finance providers and their dealer networks. It also examined how technology will play an increasingly important role in combining compliant processes with a good customer service experience.
The FCA is considering changes to the way in which commission models work following the publication of findings in its final report on the sector.
It found that the widespread use of commission can lead to conflicts of interest, in particular when giving brokers discretion to set the customer interest rate to earn higher payments.
It also claimed these are not controlled adequately by all lenders and this can lead to customers paying significantly more for their motor finance.
