Finance commissions ruling – Your questions answered
We recently hosted a webinar with a panel of experts following the recent court of appeal ruling on finance commissions to discuss what it means for the industry. During the webinar, we received hundreds of questions from our audience regarding the news. We put your questions to the panel and have summarised the most asked questions in this blog under the following themes:
Third Party Disclosure
Q: “The disclosure of the existence, calculation of, and the consent to obtain commission is the expected moving forward, however at what point, or points, of the customer journey will that be expected to be achieved? Proposal? Prior to E-Sign? Payout?”
A: The commission disclosure requirements where CONC applies still needs to be followed in that the disclosure requirements under 3.7 and 4.5 must be adhered to and tightened up. 3.7 requires disclosure as early as financial promotions for example. As far as the recent decision is concerned, the amount of the commission must also be disclosed plus obtaining informed consent must be obtained before the agreement is executed/signed.
Jo Davis, Chief Executive Officer, Auxillias
Q: “When you talk about amounts being disclosed, does that include the lender, broker and dealer all having to disclose to the customer in one document or separate documents?”
A: As a result of the decision, disclosure is to be made to the customer of all the remuneration paid across the lender-broker-retailer chain must be disclosed to the customer, including where the is a primary and a secondary broker. So, the lender discloses the remuneration that they pay, and this is disclosed to the customer. The broker should disclose the remuneration they receive. This includes the remuneration the broker receives from the lender and other broker in the chain that they work with. This means both the broker and the lender are responsible to disclose the commission they received. The lender can decide to rely on the broker to obtain the informed consent element of this decision but that is at their own risk as the lender will still be liable if this is not done correctly or in accordance with the requirements hence the reason why many lenders are seeking the informed consent themselves even in addition to the broker or as a whole.
Jo Davis, Chief Executive Officer, Auxillias
Scope of Ruling
Q: “Does this apply to all regulated finance agreement types - so PCP, personal lease, contract hire?“
A: Yes, it would seem that the case decision stretches to all products and B2C and B2B markets.
Jo Davis, Chief Executive Officer, Auxillias
DCA Investigation
Q: “How does this tie in with or influence the FCA's current ongoing work?”
A: The FCAs work looking into discretionary commission model harm is still ongoing and the pause period for cases to FOS is still continuing. The Court ruling is separate although the FCA have said that the case does relate to their own work to determine where motor finance customers have been overcharged because of the past use of the discretionary commission models. The FCA’s chief executive made a statement last night calling for the Supreme court to act quickly and that we all need clarity on whether this is the courts’ final word on the issue and for the Supreme court to decide quickly if the appeal proceeds.
Jo Davis, Chief Executive Officer, Auxillias
Complaints Management
Q: “How should we respond to customers who approach us with a complaint post the court ruling?”
A: Complaints about the discretionary commission model itself is still on pause and the FCA made a statement last night that they are considering whether or not to extend the pause wider to include complaints as a result of this decision so at the moment complaints relating to the case or disclosure more widely, can go to FOS but we will wait for the FCA decision on this.
Jo Davis, Chief Executive Officer, Auxillias
Commission Disclosure Best Practise
Q: “Given that the primary responsibility for disclosure and consent sits with the broker, is it fair to say disclosure on actual agreement is good practice rather than a requirement?“
A: The case decision is that it is a joint responsibility, and it is a seriously important requirement now that we have a court of appeal decision that requires both to comply with disclosure, so it goes beyond the regulatory position in CONC where disclosure is the responsibility of the broker.
Jo Davis, Chief Executive Officer, Auxillias
Watch the webinar
We discussed this landmark ruling and put your questions to a panel of industry experts on Tuesday 29th October
If you’d prefer to read a summary of the discussion, we’ve condensed it into a blog.