Concerns grow over UK subprime car finance deals

The UK’s financial watchdog has cautioned that the frequency with which borrowers who have poor credit report ratings are defaulting on car lending repayments is increasing.
A report from the financial Conduct Authority (FCA) says that arrears and defaults on lending repayments “have enhanced somewhat, particularly for higher credit report risk consumers.”
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The FCA inquiry also raises issues over high-interest loans being issued to borrowers with poor credit report ratings, with brokers profiting from the generous commissions these deals can bring.
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To tackle these issues, the FCA will be sending mystery consumers out to evaluate the “customer journey” process, checking whether lenders are adhering to policies and issuing consumers with enough information on loans.
The FCA announced its enquiry into the £40 billion car finance industry back in April 2017, saying it was “concerned” about a lack of transparency in the sector. While full results are due in September, the FCA has published an interim update. The report paints a typically positive picture of the market, but warns changing economic conditions could present potential problems. 
Jonathan Davidson, the FCA’s executive director of supervision, said: “The good news is that many of the growth has been to lower credit-risk consumers. However, we are also seeing that arrears and default rates, while still low, are on the rise, particularly for higher credit-risk consumers.”