Consumer credit commission disclosure – have you received a letter?

legal updates

Letters are being sent to our members requesting they divulge confidential information about commission that was not requested by the customer at the appropriate time.

Read our disclaimer keyboard_arrow_down

This website content is intended as a general guide to law as it applies to the motor trade. Lawgistics has taken every effort to ensure that the contents are as accurate and up to date as at the date of first publication.

The laws and opinions expressed within this website may be varied as the law develops. As such we cannot accept liability for or the consequence of, any change of law, or official guidelines since publication or any misuse of the information provided.

The opinions in this website are based upon the experience of the authors and it must be recognised that only the courts and recognised tribunals can interpret the law with authority.

Examples given within the website are based on the experience of the authors and centre upon issues that commonly give rise to disputes. Each situation in practice will be different and may comprise several points commented upon.

If you have any doubt about the correct legal position you should seek further legal advice from Lawgistics or a suitably qualified solicitor. We cannot accept liability for your failure to take professional advice where it should reasonably be sought by a prudent person.

All characters are fictitious and should not be taken as referring to any person living or dead.

Use of this website shall be considered acceptance of the terms of the disclaimer presented above.

As you are aware, the Financial Conduct Authority (FCA) announced in their Business Plan 2017/2018 that they were to conduct a review of the motor finance sector. This culminated in the Policy Statement PS20/8 July 2020: Motor Finance discretionary commission models and consumer credit commission disclosure – feedback on CP19/28 and final rules

I am sure you have all read it numerous times! You will, no doubt, be fully aware of the changes that your lenders have made to your commission models. Therefore, we would like to focus on commission disclosure. The FCA stated in the policy: “We also found high levels of non-compliance with some of our existing commission disclosure requirement in our Consumer Credit sourcebook (CONC).”

The findings from the FCA’s work have triggered a growing trend for certain types of solicitors to initiate business by intimating that historical finance agreements have been mis-sold and customers are not being made aware of finance commission. Letters are being sent to our members requesting they divulge confidential information about commission that was not requested by the customer at the appropriate time. We have noticed that this has caused confusion with several of our members.

Members seem to believe this is a new regulation that has only come into place on 28 January 2021. The ban on discretionary commission models came into play on this date, however, commission disclosure has been a requirement for several years. There has been a slight change to CONC 4.5.3R in January 2021 with the addition of the word “prominently”. CONC 4.5.4R has not changed and therefore, if a customer asks for the details of the commission, this information must be disclosed.

The other amendments to CONC in relation to commission disclosure is you must make known how this commission affects the customer’s credit agreement. In most cases, the following statement would suffice: “the amount of commission that we receive from a lender does not influence the amount that you pay to that lender under your credit agreement.” [CONC 4.5.3A R] 

Also, there is guidance as to any variations of credit agreements for which you may earn commission. For example, on two different types of credit agreements, Hire Purchase (HP) compared with Personal Contract Purchase (PCP) and whether you are recommending a certain agreement over another. [CONC 4.5.3B G]

As with most FCA rules and guidance, they are not prescriptive as to what you should and should not do, so the changes are very subjective. Displaying commission disclosure prominently for one member may be totally different to another. A franchised dealer with numerous manufacturers’ finance houses compared with an independent dealer using only a couple of lenders, may do things totally differently. A useful reminder of how the FCA expects you to conduct your business is very clear in Principle 7 Communication with clients: “A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.”

Also, don’t forget that the lender has a responsibility in this area, as stated in CONC: “take reasonable steps to ensure that other persons acting on its behalf comply with CONC.” [CONC 1.2.2R] The FCA highlighted this as an issue and that lenders may not be monitoring their brokers as sufficiently and closely as they should.

If you have received a solicitor’s letter or need some help or advice with regards to FCA compliance regulation, please do not hesitate to contact us. You are not alone!

Connected Car FinanceReady to take the connected approach?

We’re here to ensure all used car dealerships deliver a better car finance experience for their customers. With over 4,000 approved dealer partners we ensure you are properly supported and connected with a range of flexible finance options, allowing you to lend and your customers to buy in complete confidence.

John McDougallLegal AdvisorRead More by this author

Related Legal Updates

Mis-selling finance claims – Ignore at your peril!

Data subject access requests and various letters quoting CONC and the Consumer Credit Act are being received requesting lots of documentation to be provided.

FCA adds to “no win, no fee” compensation culture

It was found in a FCA report that car finance consumers may have been overcharged and deceived when arranging their car finance deals.

Your business should have a written complaints procedure

All businesses regulated by the Financial Conduct Authority (FCA) must follow complaint-handling rules.

Shambolic claim by finance house blown out of the water by the Big Guns!

Understandably, our member was delighted with the outcome, which was a complete vindication of its long stated position.

No finance recorded on HPI but there actually was?

This article might give you several “Twitchings”.

Moneybarn fined by the FCA

You need to advise customers of the likely financial consequences of failing to keep up with payments.

Historical rejections, finance not romance

Finance company auctioned the vehicle off (massively undervalued) and proceeded to pursue the dealer for the difference!

Get in touch

Complete the form to get in touch or via our details below:

01480 455500

Vinpenta House
High Causeway

By submitting this quote you agree to our Terms & Conditions and Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.