Frequently asked questions

Retail Mediation Activities Return (the RMAR)

Will the RMAR be tailored specifically for motor retailers?

We have no plans to do this at present. The RMAR is based on what regulated business a firm does rather than what type of firm it is. Due to the broad range of firms we regulate we do not currently plan to tailor the RMAR for each type of firm. We have identified the common RMAR issues with motor retailers and produced a guide.

Why do we have to submit the RMAR twice a year?

We use the RMAR to get a virtual visit on the firms we regulate. This enables us to get the information we need to allow us to regulate firms effectively, without having to routinely visit firms to find the information out, reducing the burden on motor retailers. As the information you supply on your RMAR will represent one of the main regular contacts we will have with you, we ask for it every six months. For some firms it may be the only contact we have at all with them. An annual return would not enable the early identification issues we need to take action on – such as a firm in financial difficultly, or developments in the market or in firms that we want to find out more about because they may have a potential for consumer detriment.

In designing the RMAR data requirements, including frequency of reporting, we consulted extensively with the industry and trade bodies.

Fees and being regulated

Why do motor retailers not have lower fees as FSA-regulated activity is a small part of their business?

The majority of motor retailers already pay the minimum fees we charge. View details on how fees are calculated.

I have not sold any insurance products in the the past 12 months. Do I still need to be authorised?

Maybe. We only require you to be authorised by us if you are conducting regulated activity. We have a factsheet to help you identify any regulated activity you may be conducting: FSA regulation of insurance selling and administration - do I need to be authorised?

Any requirements from manufacturers or finance companies for motor retailers to be authorised is currently outside of our control.

Product sales

Has the FSA identified any other potential problems with the products motor retailers sell?

We have targetted payment protection insurance (PPI) as we have found there is evidence of consumers losing out as a result of the way this product is sold. We provide information on what to think about when you sell PPI on our motor web pages.

We use an approach that puts our resources into the greatest areas of potential risk to consumers and the market as a whole. We have not identified other products motor retailers sell, such as GAP and warrranties as higher risk products at present, although we will continue to monitor the sale of these products.

What are the issues with PPI specific to motor retailers?

The issues are common across all firms selling PPI, and can be seen on the web page mentioned in the question above. However, on 20 December 2006 we imposed a public censure on Eastern Western Motor Group Limited for failures relating to its sale of PPI in connection with vehicle finance agreements.

Training

Can the FSA provide any affordable, specific training for motor retailers?

We intend to launch training specific for motor retailers in 2007.

Treating customers fairly

I get my customers to sign that they have received the appropriate disclosure documentation and that the product cover has been explained. Can I use this as a disclaimer in the event of any complaint being made?

No. Your firm still remains responsible for demonstrating that they have treated customers fairly. Each complaint must be considered in light of the information supplied. In the event that any complaint is escalated to the Financial Ombudsman Service (FOS) it will be down to your firm to demonstrate that they have sound systems and controls in place to support the quality and level of advice given. It is essential that your firm has the these processes recorded.

All my customers complete a customer survey following completion of a car sale. Is this sufficient to satisfy the FSA requirements in relation to treating customers fairly (TCF)?

No. TCF is not just about customer satisfaction but should cover every aspect of your business. The areas we expect firms to consider in relation to TCF can be found at What is TCF?

Client money

I receive insurance premiums along with the cost of the car. Am I holding client money?

You might be. Client money is money of any currency that a firm receives and hold for its customers when carrying on insurance mediation. It can include insurance premiums. Money held under a risk transfer agreement (RTA) or money not connected with insurance mediation (for example, as deposit for a car) is not client money. Most motor retailers are likely to have a RTA in place. You can find out full details on our client money requirements in our Guide to Client Money. Motor Retailers are specifically covered in section 2.5 on page 16, which deals with the scenario of what we call a mixed remittance – which is where the firm receives money from a customer comprising client money and money that is not client money – eg money to pay for a car and money to pay for insurance.

PPI

What is payment protection insurance?

Payment protection insurance (PPI) is sometimes also called accident, sickness and unemployment insurance.

It is often sold alongside finance to customers buying a motor vehicle. These insurance policies help consumers keep up monthly repayments if the person taking out the finance can't work because of redundancy, accident or illness.

A typical policy will start to pay an agreed amount one month after the income stops due to redundancy, accident or illness. It will continue to pay for a set time – usually 12 or 24 months. This agreed amount will pay or go towards paying the finance repayments.

PPI is optional and there is no requirement to buy this cover to get a loan. In addition, it does not have to be from the finance provider, and can be purchased as a standalone product separate from the loan.

What is the difference between single and regular premium PPI?

PPI policies are sold on either a single or regular premium basis. With a single premium policy a lump sum of 3-5 years' worth of premiums is paid in advance. This amount is added to the sum borrowed and attracts interest, so the customer is paying more over the long run.

The interest and implications if the customer cancels the policy or repays the loan early should always be explained before the purchase of PPI is concluded.

With a regular premium PPI the customer does not pay in advance.

What is the difference between an advised and non- advised sale of PPI?

In short, you give advice when you make a personal recommendation to the customer. A non-advised sale is when no personal recommendation is made to the customer.

For all sales, both advised and non-advised, a firm must pay due regards to the interest of its customers to ensure that appropriate information and disclosures are made to the client and that communications are clear fair and not misleading.

A non-advised sale cannot be led by the adviser and they can only confirm that they offer a number of products, or one product, that the customer chooses themselves.

More information is available in our factsheet: Advised and non-advised sales.