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'Buyers Urged to Question Finance and Commission Rates'

'Buyers Urged to Question Finance and Commission Rates'

This was the headline on a consumer website recently. Another suggested that from January 28th consumers could save a typical £1,100 on their car finance. Dealers need to be ready for greater levels of consumer interest in a dealer's finance commission.

As well as media interest in the Financial Conduct Authority (FCA) changes, the FCA's new CONC rules are designed to ensure consumers have better knowledge of dealers' finance commissions and are 'more likely to engage with what is on offer.'

 The updated CONC rule requires dealers to ensure customers are aware of the existence of any commission, fee or other remuneration ahead of any finance agreement being finalised. The prominence required in disclosing the existence of commission will inevitably lead to more people asking; 'how much?'

The right to access commission details is not new (see below), but in light of the other changes and inevitable publicity, dealers should anticipate more requests for full commission disclosure, perhaps more especially as showrooms re-open. 

Reflecting on the potential for increased customer interest in dealer finance commission, Stephan Bothma, MotoNovo Finance's Chief Risk Officer observes;

"This recent news headline crystalises the importance of dealers being prepared to respond to more customer enquiries about commission quickly and accurately as required by the regulator. Dealers must maintain a written evidence trail to prove that this information and broader commission disclosure requirements have been provided on a timely basis. Without this, defending any subsequent legal claims could be difficult."

The commission to be disclosed to customers must be accurate, or if the precise amount is not known, must reflect the likely amount and it must include any commission or fee or other remuneration payable to the dealer/group by the lender involved.

Stephan concludes; "Commission disclosure is an ongoing risk. We know claims management companies have been increasingly active in motor finance. Compliance with the new commission disclosure rules and appropriate evidence is critical because accountability lies primarily with dealers and brokers" 

1At the request of the customer, a credit broker must disclose to the customer, in good time before a regulated credit agreement or a regulated consumer hire agreement is entered into, the amount (or if the precise amount is not known, the likely amount) of any commission or fee or other remuneration payable to the credit broker by the lender or owner or a third party. (CONC 4.5.4R)

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