AM magazine – Is your motor retail business ready for the FCA?

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S P E C I A L R E P O R T: C O N S U M E R C R E D I T R E G U L A T I O N S

CAN YOU AFFORD TO GAMBLE WITH THE FCA? New consumer credit regulations come into force on April 1.

Are your dealerships ready?

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FCA SPECIAL REPORT Consumer credit

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The FCA takes control of consumer credit regulation on April 1. Its message is simple:

Put the customer at the heart of your business...

YOURERS S CU TOM

...and prove it NEED TO KNOW n Electronic and paper trails need to be in place to show that the customer has been treated fairly at all stages n Dealers offering finance with no permission may face jail

I

By Tim Rose s your dealership’s F&I operation customer-centric? Can you prove it? If not, can you afford to stop selling motor finance or face becoming one of the first motor retail groups to gamble on a potential multi-million pound fine from the Financial Conduct Authority?

On April 1, regulation of the consumer credit industry passes to the Financial Conduct Authority from the Office of Fair Trading (OFT). This means that by the time franchised dealers read this, they must have registered with the FCA for interim permission in order to legally continue offering motor finance to their customers. Dealers can still apply for permission after April 1, but will not be able to carry out any credit-related regulated activities until their application is approved, which could take up to six months.

Different credit activities require different categories of authorisation and dealers must ensure they have the correct permission for all the regulated activities they carry out, such as debt counselling (Cat E) and adjusting (Cat D) if they settle

£450m

of potential financial harm to consumers is not being addressed, according to the National Audit Office

50,000

consumer credit firms come under the FCA’s responsibility

outstanding finance amounts due on customers’ partexchanges. If dealers conduct such activities without the relevant authorisation they are in breach of Section 19 of the Financial Services and Markets Act 2000 and could receive an unlimited fine or two years’ imprisonment.

Christopher Woolard, the FCA’s director of policy, risk and research, explained the FCA’s approach to consumer credit: “The key issue here is that the current regime is struggling to protect consumers – the National Audit Office has talked of at least £450 million of potential financial harm not being addressed at the moment.

“In other words, the evolution of the UK consumer credit industry has outpaced its current regulation. That is why we find ourselves where we are today – with the FCA on the cusp of taking responsibility for some 50,000 consumer credit firms.”

From April 1, the FCA will be actively monitoring compliance and enforcing the regulations. It then provides a six-month transition period during which it will not take action, providing firms adhere to the existing Office of Fair Trading guidance and Consumer Credit Act requirements.

The next step will require firms to apply for full authorisation, which they can do as early as April 1, although dealers will be allocated a “landing slot” by the FCA after October 1. The fees for authorisation will be tiered, based on the income a business generates from its credit activities, ensuring that the smallest firms pay the lowest fees.

FCA SPECIAL REPORT Consumer credit Martin Parr, Alphera Financial Services’ UK FCA readiness manager, said as long as dealerships have been compliant with the recent Office of Fair Trading (OFT) guidelines, they should find themselves on the right side of the FCA rules.

However, there will be far more emphasis on proving compliance – electronic and paper trails need to be in place to show that the customer has been treated fairly at all stages and that customer needs have been placed at the heart of all business processes.

“Principles-led regulation is designed with the consumer in mind and this means that compliance is not always black and white. An approach which puts the customer at the heart of decision-making process will be viewed far more favourably under the FCA than one focused purely on profit,” said Parr.

“It is important, therefore, that dealers do everything within their power to create systems and processes that lend themselves to providing evidence of a cultural alignment with the fair treatment of customers.”

“It is too early to say what impact the changes will have on profit” Louise Wallis, NFDA Louise Wallis, National Franchised Dealers Association head of business development, said she was “pleasantly surprised” that the rules were generally in line with the NFDA’s expectations.

“Most of the rules are a straight lift of current legislation and guidance. Dealers currently compliant should have few issues, but will need to make a few changes to their processes and paperwork over the next few months to be ready for FCA authorisation. Where they need to make changes to comply, the NFDA has help available,” she said.

“It is too early to say what impact the changes will have on profit, although there is nothing in the rules that would suggest dealers will be adversely affected.”

The FCA is aiming first at those consumer credit sectors considered the highest risk. Its initial focus is on payday lenders, pawnbrokers and debt collection companies, as these are industries in which it sees an urgent need for better consumer outcomes.

Many in the motor finance industry don’t expect the FCA to actively pursue dealers until these other priorities have been dealt with, unless issues are raised with a specific motor retailer. Retailers such as motor dealers introducing customers to a finance provider are seen as low-risk, with an option of gaining limited permission with lower fees and fewer reporting requirements.

However, AM understands dealers that already have the FCA’s separate authorisation for insurance are being viewed as a greater risk and may require full authorisation for consumer credit.

W H AT A R E T H E R U L E S ?

The Financial Conduct Authority published its finalised rules for consumer credit companies at the end of February.

They include a stipulation for commission disclosure to customers before they sign a credit agreement. That is required if the dealer is acting as a finance broker and that commission could potentially affect the impartiality of the dealership, business manager or broker in recommending a particular product, such as if it will earn him more than other suitable products, or could have a material impact on the customer’s transactional decision.

Separately, if a customer requests it, the dealer/broker must disclose, prior to the agreement being signed, the amount, or likely amount, of any commission, fee or other remuneration payable to them by the lender or third party.

The FCA has also clarified that, where practicable, firms should facilitate customers shopping around for credit by offering a quotation search facility.

They should also, when undertaking a credit reference search, not leave evidence of an application on file where that customer is not yet ready to apply, due to it potentially damaging the customer’s credit history.

All complaints regarding motor finance, including verbal ones, that cannot be resolved in the same business day must also be logged and reported by firms with full FCA permission, with details of the number of complaints received, closed, upheld and outstanding and the redress paid. Dealers with less than £5 million of annual revenue from credit-related regulated activities will be

“There will be swift penalties for any firm or individual found not to be putting consumers’ interests first” Martin Wheatley, FCA

required to submit reports annually.

Those with larger revenues will report more often, with details of financial data, volumes of customers and volume of credit approvals. Records must be kept for three years.

Under the new regime, which starts on April 1, consumer credit providers will need to ensure they give customers the right information to make informed choices, that their services meet consumer needs, and that people in difficulty are treated fairly.

Martin Wheatley, FCA chief executive, said: “The FCA will take a tough approach to consumer credit with stronger powers to clamp down on poor practice than the previous Office of Fair Trading regime. Our supervision of firms will be hands-on and we will closely monitor how providers treat their customers.

“We will respond quickly to any issues that are identified and there will be swift penalties for any firm or individual found not to be putting consumers’ interests first, including possible enforcement action and consumer redress.”

The FCA also said companies were expected to comply with the ‘spirit’ of its new rules, and not merely the ‘letter’ of them.

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YOURERS CUSTOM

The message for dealers and their motor finance partners is to embrace the change. The FCA’s regulation may even result in the franchised dealers’ business model changing, leading to greater certainty or stability for dealer profit.

At Hitachi Capital Motor Finance, managing director Gerald Grimes said the scrutiny of point of sale finance and insurance may make the industry go back to working like other retailers – buying something at one price, adding value and selling at another. Finance could be the promotional product.

“We may well see a consequence being the actual ticket price of cars increasing, because they have to get the profit from somewhere. We’ve seen the kind of perverse statistics in years gone by where large dealer groups have actually made a loss on their sales activity but they made £50m with their F&I income. In that situation now, they would be categorised as a finance company,” said Grimes.

The demands put on finance sellers by the FCA may also lead to an opening up of the sales process, and a diminishing of customer complaints. Grimes said the hope is that the consumer will benefit from this, by being able to compare the deal more effectively against others in the market.

That may still prove a challenge for some in motor retail to see. The response of one director of a major AM100 dealer group to the FCA’s mandate of commission disclosure (see previous page) was concern that “a consumer champion like Martin Lewis could get hold of the wrong end of the stick and start advertising this as a necessary practice for consumers”.

One independent motor finance expert said: “Franchised dealers will be more exposed to this than used car dealers because the used car dealers make more money from the metal. Franchised dealers with large overheads and tight margins are reliant on the extra commissions and bonuses.

Four-figure sums per car from add-ons are not unusual.

“The buzz phrase from the FCA now is ‘creating a better consumer outcome’. Culturally, this industry is all about selling.

The FCA is not about selling, it’s about making it easy for people to buy.” While the FCA doesn’t understand the motor retail industry and its margin structure, it is willing to listen to dealers, he added.

That was a point echoed by Mark Smith, managing director of The Car Finance Company. He said the regulator will be keen to learn and understand how dealerships’ income is earned. His advice to dealers? “If everyone looked from the ‘outside – in’, asking the obvious question of ‘would I agree to this?’, it would be a start. We have invited a firm of lawyers to rigorously assess our entire business as a health check, and I would recommend taking advice from external experts rather than assuming all must be OK because no one complains.”

P R INCIPA L S AND APPOINTED REPS An appointed representative (AR) is a firm or individual that carries out regulated activities under the supervision of another firm that is directly authorised by the FCA. It means the authorised firm, typically a lender, takes responsibility for ensuring that the appointed representative meets the FCA requirements and is accountable for the products the AR sells, the advice it gives and for ensuring it delivers the ‘treating customers fairly’ outcomes.

For some smaller dealers, it could mean less of a financial and reporting requirement.

However, one finance industry source said many lenders are reluctant to act as principals and appoint ARs within the motor trade due to the risks involved.

The FCA is engaging with the motor finance industry to resolve this.

IS NOT BEING AUTHORISED AN OPTION FOR DE ALERS? For franchised dealers, reliant on customers being able to get finance at the point of sale in order to purchase their car, lack of authorisation would leave the business severely restricted, with customers required to arrange their own funding. The Finance and Leasing Association (FLA) reported that 70% of retail car purchases were funded at point of sale last year.

As Hitachi Capital Motor Finance managing director Gerald Grimes put it: “This is draconian regulation, really designed to protect the customer, but the customer’s expectation is that they can go in to a dealership and it will provide them a finance option.

There’s no way they would expect to go to buy a car and not be offered a finance option.”

The FCA has also pointed out the risks to dealers that continue to offer motor finance, or settle customers’ balances on part-exchanges, without its authorisation. Such firms and individuals breach Section 19 of the Financial Services and Markets Act 2000, a criminal offence punishable by a maximum prison sentence of two years and a fine.

In addition, FCA enforcement powers include action through the civil courts such as injunctions, asset freezes, winding up and bankruptcy and publishing warnings against specific firms and individuals.

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We also have a “zero” upheld complaint record with the regulator and intend to maintain this status, ensuring that the

customer-centric model continues. We do not have external private equity or venture capitalist-style funding and, as a result, are able to flow more dynamically, without the rigidity of nonsensical rules.

Providing credit via hire purchase agreements, we offer advances ranging from £1,000-£10,000 and only allow cars to be purchased from dealerships with the appropriate regulatory permissions. Our interest rates range from 29% APR*, with terms up to 48 months and advances up to 110% GGR or CAP clean (mileage-

“20 million adults nationwide face difficulty in gaining credit to purchase a ‘must-have’ vehicle.

The potential market is huge”

adjusted), thus enabling customers to buy a car of their choice rather than “one that fits the scheme”.

What’s more, we accept more than 50% of all applicants (subject to simple transaction criteria). Following the approval stage, all customers are met by our field-based staff and taken through the HPI agreement, relieving you of the regulatory burden of ensuring that everything has been adequately explained.

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Extensive research into the market has shown that more than 20 million adults nationwide face difficulty in gaining credit to purchase a ‘must-have’ vehicle. The potential market is huge and incremental to what is currently being sold.

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What we can do for you We consider every application we receive, no matter the customer’s credit history, and only focus on the past six months. Combining this approach to applications with our industry-high conversion rate means you can sell a greater amount of your cars, more frequently and to a larger target market.

Our continual aim has been to make the entire process as simple, easy and hasslefree as possible for all of our partners. All you need to provide is a reliable vehicle that matches simple criteria, together with basic customer information – we do the rest!

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FCA SPECIAL REPORT Consumer credit PUNISHMENT

How badly could the FCA bite motor retailers?

Watchdog has imposed heavy penalties for breaches of its rules in other business sectors EX AMPLES OF RECENT FCA ACTION

£31m

for insurance intermediary The FCA issued its largest ever retail fine of £30,647,400 to insurance intermediary HomeServe Membership after finding that HomeServe had serious, systemic and longrunning failings, extending across many key aspects of its business. In particular, during the period January 2005 to October 2011 it mis-sold insurance policies, failed to investigate complaints adequately, its board was insufficiently engaged with compliance matters and its senior management was reluctant to address risks to customers if there was a cost implication involved. The FCA found that HomeServe breached principles 3, 6 and 7 of the FCA’s Principles of Business (see page 46). HomeServe would have received a £43.8m fine, were it not for a 30% discount under the FCA’s executive settlement procedures as it agreed to settle at an early stage of the investigation.

NEED TO KNOW n Financial regulator can levy unlimited fines n Companies must operate to its 11 high-level principles n It will look at how incentives affect customer outcomes

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By Tim Rose he Financial Conduct Authority regulates the financial services industry in the UK, from banking and investments to insurance and, from April 1, consumer credit.

Its stated aim is to protect consumers, ensure the industry remains stable and to promote healthy competition between financial services providers. It has rule-making, investigative and enforcement powers that it uses to protect and regulate the financial services industry. Its strategic objective is to ensure that the relevant markets function well. However, it also has a very strong consumer protection element.

It is not funded by government, instead raising its own funds through fees charged to authorised firms that follow its rules and guidelines and through fines imposed on those that fail to comply with its regulations.

FCA chief executive Martin Wheatley recently said it needs to be a regulatory structure that is “forward looking, that anticipates and tackles issues before they become multimillion pound problems”.

He suggested two of the key aspects that may trigger its interest in any particular issue or product are the number of complaints and significant imbalances between the earnings generated and the benefit to the consumer.

£4m

for unfair profits The FCA fined Forex Capital Markets and FXCM Securities £4 million for allowing the US-based FXCM Group to withhold profits worth approximately £6 million from foreign exchange transactions that should have been passed on to FXCM UK’s clients. FXCM UK had also failed to tell the FCA that the US authorities were investigating another part of the FXCM Group for the same misconduct. The FCA ruled it had breached its principle 6, of treating customers fairly, and principle 11, of being open and cooperative with the regulator.

for adviser who misled investors The FCA banned Arnold Eber, the former chief executive of now defunct advisory firm CIB Partners, from performing any function in relation to any regulated activity in the financial services industry.

The FCA found that Eber lacked integrity as he had misled investors about the strength of certain bonds and failed to inform the regulator about his concerns about the bonds’ viability.

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£175,000

Firm enters voluntary liquidation after FCA fine Porta Verde Finance Services was fined by the FCA after two of its appointed representatives mis-sold insurance. The company would have faced a £353,800 fine but settled early and has since entered voluntary liquidation. The FCA said the appointed representatives used highpressure sales tactics and misleading information to push often vulnerable and elderly consumers into buying insurance for satellite TV equipment, plumbing and drainage repairs.

Individual worker fined and banned from regulated financial work The FCA fined David John Hobbs £175,000 and banned him from working in the financial services industry after Hobbs lied to it during an investigation.

The investigation actually cleared Hobbs, a proprietary trader at Mizuho International, of alleged market abuse.

However, during the investigation Hobbs had put forward a false defence, which he maintained during the case.

The case ruled that in doing so he had exhibited a lack of integrity such that he was not fit and proper to be an FCA-approved person working in the financial industry.

£28m Retail conduct failings concerning the sale of ISAs, income protection insurance

Lloyds TSB, Halifax and Bank of Scotland fined for sales incentive failings and critical illness insurance at Lloyds TSB, Halifax and Bank of Scotland led to a £28m FCA fine.

The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or

avoid being demoted, rather thanfocusonwhatconsumers may need or want.

The FCA fine included a 10% increase because Lloyds TSB had been fined 10 years previously for mis-selling of bonds.

in high street banks, building societies and insurance companies In September 2012, the FCA uncovered incentive schemes likely to cause mis-selling in most retail banks, building societies and insurance companies with retail sales staff.

It issued guidance on risks to customers from financial incentives in January 2013 and has since been working with the retail financial services sector to improve its management of these risks and drive genuine cultural change.

Areas the FCA has identified for better management by banks include doing more to monitor poor behaviour in face-to-face sales conversations; managing the risks in discretionary incentive schemes and balanced scorecards, including the risk that discretion could be misused; and recognising that remuneration that is effectively 100% variable pay, based on sales, increases the risk of mis-selling and managing this risk.

The FCA has also made clear that firms should not simply replace bonus schemes with other performance management measures, which can put pressure on sales staff and are just as capable of causing poor sales practices.

The FCA has since stated that, once it has begun overseeing the consumer credit market from April 1, it will look at the extent to which financial incentives drive poor customer outcomes.

11 P R I N C I P L E S O F B U S I N E S S T H E F C A E X P E C T S R E G U L A T E D F I R M S T O A B I D E B Y 1 Integrity A firm must conduct its business with integrity.

2 Skill, care and diligence A firm must

conduct its business with due skill, care and diligence.

3 Management and control A firm must

take reasonable care to organise and control its affairs responsibly and effectively.

4 Financial prudence A firm must maintain adequate financial resources.

5 Market conduct A firm must observe proper standards of market conduct.

6 Customers’ interests A firm must pay due

suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

7 Communications with clients A firm must

10 Clients’ assets A firm must arrange

regard to the interests of its customers and treat them fairly.

pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and accurate.

adequate protection for clients’ assets when it is responsible for them.

8 Conflicts of interest A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

deal with its regulators in an open and cooperative way, and must disclose to the regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

9 Customers: relationships of trust A firm must take reasonable care to ensure the

11 Relations with regulators A firm must

n For more on the FCA, go to am-online.com/fca

FCA SPECIAL REPORT Consumer credit ADD-ON INSURANCE

Changes could ban dealers selling GAP at point of sale FCA inquiry found lack of transparency about price and cover of add-on insurance products HOW T HE FC A WA N T S GA P S A L E S T O W OR K

NEED TO KNOW n Proposals could restrict dealers to offering information n The FCA estimates overpaying for add-on products costs consumers £200 million a year across all industries

Customer approches vehicle dealer

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By Tom Seymour he Financial Conduct Authority (FCA) is proposing a number of changes to the way general insurance products are sold in the dealership, which could massively affect the sale of GAP at the point of sale.

It could mean that while dealers can explain and offer GAP when selling a car, it cannot be sold when the car is purchased. Customers can walk away with details of a dealership’s offer, but must be told alternatives are available. The customer can then get in touch with the dealer to buy GAP at a later date or the dealership can contact the customer about the GAP policy after a number of days have passed (the amount is still to be determined by the FCA).

The FCA has put together a 69-page document of proposals following its investigation into the general insurance add-ons market. Since the inquiry began in July 2013, the FCA has analysed evidence about companies and consumers in the travel, gadget, GAP, home emergency and personal accident add-on insurance markets.

The FCA reviewed the experiences of more than 1,000 consumers and carried out behavioural research to understand if buying decisions were affected by different sales tactics. The FCA also reviewed product literature, sales, pricing, profitability, and claims.

The FCA believes it is currently too complicated to compare packages of products with separate prices in

tive to risk and receptive to a sale at the point of making what is, for many people, one of the most expensive purchases they will make, and which they will want to protect.

“Consumers may also be unclear about the actual cost of GAP versus that of the car or the car finance, as GAP may be presented as part of a deal or a way of securing a discount on the primary product.”

A POS dealer or finance company explains GAP policy features and cost

A POS dealer decides not to offer GAP

Consumer purchases vehicle

Customer options postpurchase of vehicle

WHY FOCUS ON GAP? The FCA said the particular circumstances of the GAP sale may exacerbate some of the things it believes can affect consumer behaviour.

Its report says: “GAP is usually sold face to face, and we know that such sales can be particularly persuasive. In addition, the price of GAP may seem small against a high reference price – that of the car.

“The consumer is also likely to be more sensi-

If GAP offered at point of sale, information on alteratives must be provided

No fewer than (x) days later

Dealer/finance company can contact customer to sell GAP policy

From time of, or before, purchase of vehicle

No fewer than (x) days later

Consumer can purchase standalone GAP policy not linked to dealer or finance company, or decide not to purchase

Consumer can proactively contact dealer/finance company to conclude GAP policy

O T H E R P R O D U C T S T H AT M AY B E A F F E C T E D

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the showroom and believes there is a lack of transparency about add-on cover and price.

The FCA has estimated that consumers are overpaying for add-on products up to the value of £200 million a year across all industries.

A spokeswoman for the FCA said the changes were proposals at this stage and a decision will be made on how the industry will proceed after it gathers feedback.

The FCA’s investigation was initiated against a backdrop of a series of actions tackling the mis-selling of products sold as add-ons, including payment protection insurance (PPI), card protection, identity theft protection, personal accident, home emergency and breakdown cover products.

While the proposed changes affect the sale of all general insurance add-ons, FCA communications highlighted GAP insurance in particular as a target.

Christopher Woolard, director of policy, risk and research at the FCA, said: “There’s a clear case for us to intervene.

Competition in this market is not working well and many consumers are simply not getting value for money. Firms must start putting consumers first and stop seeing them as pound signs.

“We believe our proposals will address these issues and prevent consumers paying for poor-value insurance products that they may not need or use.”

Dealers have until April 8 to send their feedback to the FCA (am-online.com/addonfeedback).

Sue Robinson, NFDA director, said: “The NFDA is concerned that the changes to GAP insurance could affect dealerships and cause significant problems overall for the industry. We will be reviewing and responding to the outlined proposals.”

Fernando Gomez, managing director of Mapfre Abraxas, which provides dealers with GAP, told AM: “It’s certainly not the end of the line for GAP sold through the automotive industry.

“The FCA have not raised any issues with the product itself. Of course, dealers are going to need to adapt their distribution models for GAP insurance in light of the FCA findings and we will assist them in doing so. However, we believe there is definitely still a strong market and a genuine customer need.

“The automotive industry always faces challenges and it always responds – this is another one of those situations and we’re confident we will all adapt for the future.”

The potential changes to the sale of general insurance add-ons

“Competition in this market is not working…

Firms must start putting consumers first and stop seeing them as pound signs” Christopher Woolard, director of policy, risk and research at the FCA

have been called “surprisingly generic” by the Association of British Insurers.

Hugh Savill, director of regulation, said: “This is a surprisingly generic study into general insurance add-on markets, which offer different products to meet differing needs, through different distribution chains.

“Distinct markets call for bespoke regulatory approaches, not a ‘one size fits all’ approach covering everything from GAP insurance to travel insurance. We hope and expect that the FCA will take a more market-specific approach to this as their work on this develops.”

Savill said the emphasis on claims ratios was “unhelpful” as he believes they are not an accurate benchmark of customer value: “We believe claims frequency and handling provides a more relevant measure of value.”

The FCA’s report stated the weighted annual claims frequency of add-on GAP cover was 0.3% for the period 2008-2012.

“One of the key reasons customers purchase insurance is the peace of mind it provides,” said Savill. “We would urge the FCA to take these factors more seriously in its further work.”

Dealers will find it difficult to prepare for changes at this stage before the FCA publishes its findings, with the only indication that it will be before the end of this year.

However, the FCA has said its remedies for GAP insurance will be introduced on an “accelerated timetable”. n Dealers have until April 8 to send on their feedback. Visit am-online.com/fca for links to the FCA’s feedback site and to download the full FCA study.

AM-ONLINE.COM RE ADER COMMENTS Max said: “The FCA would like very well educated customers. The reality is they are not – even going to a comparison website is not always in the customer’s best/own interest.

“The FCA does nothing, like the FSA before it, to educate customers, bar some lame generic efforts. If a customer read this report, would they really purchase better cover?

“Customers who do detail will always seek out the best cover. Those who ‘shop’ by price alone may, in particular circumstances, come

unstuck. Not all GAP has the same benefits or exclusions, and some internet offerings are priced to sell rather than offering the best cover.

“Seek the product benefits (and exclusions) you need, from a reliable source, at a price you think is appropriate and take your chance, as an informed customer. Dealers have the opportunity to offer that relationship of trust.

The FCA report may be flawed, but remedies are coming. Dealers should respond to the consultation.”

Jon said: “The really interesting part is if dealers opt out of such products, how is a customer not being offered GAP the best possible customer outcome?

“How long will it be before someone who loses their job thinks they have been mis-sold finance because the finance house didn’t give them the opportunity to protect their payments (due to the deluge of PPI claimbacks), therefore putting them in a position of risk without informing them?”

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