Black Horse, the largest non-manufacturer car finance provider in the UK, recently posted a 30 percent increase in lending balance for the first six months of 2016. In a Q&A with its managing director Richard Jones, Fred Crawley gauged the mood at the Lloyds subsidiary
Black Horse’s managing director reveals what he finds surprising in the market to Credit Strategy.
FC: You’ve just done your first year at Black Horse - what were you doing beforehand, and how did that prepare you?
RJ: “Most recently I was with Scottish Widows, where I had spent nearly 15 years. The businesses I worked with there, like pensions and life insurance, are very heavily regulated - that gave me a good grounding for moving into a market with increasing regulation.”
FC: What have you found surprising or new about the market Black Horse works in?
RJ: “Black Horse is quite unique even in a group with the breadth of LBG – it really is a business in its own right. And a huge aspect of that is the dealer culture. I’ve worked in other intermediated markets, but here in particular I’ve really enjoyed interactions with the trade. It’s full of people who are down to earth, firm and fair.”
FC: How do you feel Black Horse fits in the ongoing debate of offering finance directly to consumers?
RJ: “Our identity is very clear – we are an intermediary lender. Lloyds may lend directly to consumers, but that isn’t a Black Horse thing. My focus on digital is around the dealer journey, and on the customer experience. At the moment more than 80 percent of car finance is sold through dealers, and I don’t see that changing so long as dealers keep their offering totally relevant to how customers want to buy cars.”
FC: How do you feel that regulation around commissions disclosure is changing life for dealers?
RJ: “I’ve worked in markets where it’s been the standard for a long time - and I think if it came in it wouldn’t make a difference to this industry. After all, customers expect dealers to be paid for finance sales. We do customer monitoring on behalf of our dealers; in the last year we’ve spoken to 4,500 customers, and we feed back what we hear to our partners.
“One of the things we asked customers is whether they were told by dealers that commission was present in the deal. The results were good – the vast majority were told. For those customers who weren’t, we asked if they would have reconsidered the deal if they had known we paid the dealer. Only one customer said yes. I think it’s possible we could get unduly concerned about something customers just don’t mind.”
RJ: Do you have any concerns around commissions disclosure?
FC: “In the long run, whether we introduce it mandatorily or voluntarily, we will need a level playing field on how it’s done - for example, so people don’t find ways to hide commission elsewhere in a deal. There has also been a valid point raised by the industry, that we need to be careful not to make commission so prominent that customers don’t see the total value of deal.”
“Although I’m relaxed based on what I’ve seen in insurance, I still know there could be unintended consequences. It’s something we need to discuss more as an industry, and having recently joined the FLA board, it’s a discussion I’m keen to develop. You have to keep moving the agenda forward - regulation is necessary, but in and of itself is never sufficient for change. We all need to work together, so we can be done with it.
RJ: Black Horse has got a lot of attention over the last year for technological and process innovation - how does that mesh with the business being the size it is?
FC: “We have a real focus on agility. While we’re big, we always try to find a way to act like we’re not when it comes to changing things. For example with the implementation of Consumer Contract Regulations we moved quickly to an APR-led model. That said, we’ve still got a big infrastructure and it can take time to get things done – so it’s as much about forward thinking as persistence”