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Treating Customers Fairly
Treating Customers Fairly (TCF) has been the cornerstone of financial regulation for consumer credit for some time. The Financial Conduct Authority (FCA) has made it clear that this principle will be given higher urgency in terms of enforcement. The FCA requires that all businesses it regulates comply with their provisions on Treating Customers Fairly (TCF) and on embedding good consumer outcomes into all parts of their business culture.
There are no tick boxes, no absolute guidelines -- it is a business principle that the FCA expects regulated entities to adopt at a deep cultural level. This guide is a high-level overview of how to fulfil the FCA's requirements on TCF.
TCF is not the same as treating customers 'nicely' or providing customer satisfaction. Instead, it is designed to ensure the business puts the interests of the customer at the heart of their business, as well as the integrity of the market.
TCF is found in Principle 6 of the FCA Handbook which explains that"a firm must pay due regard to the interests of its customers and treat them fairly." TCF is also tied to 4 of the 11 guiding principles:
- Principle 1 -- A firm must conduct its business with integrity
- Principle 7 -- A firm must pay due regard to the information needs of its clients and communicate information to them in a way that is clear, fair and not misleading>
- Principle 8 -- A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client
- Principle 9 -- A firm must take reasonable care to ensure that the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgement
TCF then is about far more than just the actual customer experience at Hippo Motor Group. It is an important aspect of all areas of our business. The concepts of TCF is in every step of the sales process, from staff training to the information and financial products supplied to our customers, as well as resolving any subsequent issues a customer may have.
What Does Hippo Do?
While it would be possible to compile a huge list of things Hippo could do to ensure TCF principles are followed, this is unnecessary. The best approach is to take a principled approach.
Hippo takes the core message of honesty, integrity and fairness and applies this to any customer situation.
Hippo ensures there are appropriate processes in place to make sure TCF is delivered and have a system in place to review TCF on a regular basis, identifying any shortcomings. These are important forms of Management Information (MI) and MI is a key part of the monitoring process that the FCA expects to be followed.
Key areas which are considered as forming part of a good TCF approach in our showroom are recorded to demonstrate that process controls are in place and being followed.
Hippo Motor Group currently sources most of its business via the internet, however other forms of marketing are undertaken as well as walk-in business. It advertises for both prime and non-prime customers looking to finance either new or used motor vehicles.
Due to the wide spectrum of customer applications, all Account Managers are trained to ensure they understand the needs and expectations of a range of applicants with vastly differing credit profiles.
Products on offer include Hire Purchase, Lease Purchase, Personal Contract Purchase and Personal Contract Hire. In addition, ancillary products, such as vehicle warranties and GAP Insurance are also provided.
All sales staff are SAF accredited.
Treating customers fairly is central to the company culture within Hippo and to this end, the process of buying a vehicle on finance has been refined to ensure that each and every customer gets the deal that is best suited to them in terms of:
- The finance product offered
- A wide selection of vehicles to choose from
- The repayment is within their desired budget
- Insurance products such as GAP and Warranty are offered
To ensure that the customer's credit file is not adversely affected by numerous credit searches, an initial 'soft' credit search is completed to ascertain the most appropriate lender that best suits the applicant's current financial circumstances.
Once it has been established, if the customer meets a prime funders lending criteria the application is sent to the company the underwriter feels is most likely to accept the application and also to the lender who can offer the customer the most appropriate facility in terms of meeting their monthly repayment expectation and maximum loan duration. For example, some lenders offer to finance older vehicles or accept higher mileages at end of term etc.
Currently, there are five prime funders who offer the same APR:
- Mann Island
If an application fails to meet the criteria set out by one of the prime lenders above, then Hippo has the facility to access a panel of sub-prime lenders who look to approve customers with varying levels of derogatory credit. The underwriter will review the application and credit file and make an informed decision (based on the customer profile and current credit circumstances) as to which lender the application is sent to.
Each of the funders has some kind of niche or area they accept business in, that's the reason we have so many on our panel. For instance, Billing will accept provisional licence holders, Startline offer a non-prime PCP and Premium Plan and Moneybarn will accept people currently in an IVA.
The current panel of non-prime lenders is detailed below, and they offer rates varying from 12.5% APR up to 49% APR depending on the customer's current financial circumstances.
The individual rate for the customer is set by these lenders.
Sub-prime lending panel:
- Blue Motor Finance
- Marsh Finance
- Premium Plan
- First Stop