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Finance Commission Disclosure - Prominence is Essential

Finance Commission Disclosure - Prominence is Essential

The new Financial Conduct Authority (FCA) rules on commission disclosure are high level, giving dealers significant discretion on how disclosures are made. Still, anything other than prominence at the crucial stages places dealers at risk. The risks come from potential FCA action and claim management companies' (cmcs') campaigning activities.

One CMS is currently campaigning across social media with the claim that;

"Qualifying PCP holders are claiming £1000s due to undisclosed commissions on their car deal."

In highlighting the risk to dealers, motonovo Chief Risk Officer Stephan Bothma notes, "While the authenticity of the CMC's numbers cannot be verified, this message is not an isolated one and the claims suggested are not limited to PCP agreements. In the event of a claim, the accountability lies primarily with dealers and brokers. To protect themselves and because it is the right thing to do, dealers are advised to double-check that they are complying with the FCA's new rules on commission disclosure consistently in their promotional and pre-contract activities."

Dealers are required to disclose the existence and nature of any commission, fees or other remuneration they may earn from finance and do so prominently and 'in good time' in all promotional activity referencing finance. There is no necessity to provide the commission's monetary value unless asked by the customer. If asked for this information, it must be provided, again in 'good time' with details on the precise or likely amount to be earned. 

Encouraging dealers to review their commission disclosure processes and controls, Stephan concludes by pointing to industry guidance and the regulators CONC requirements;

"The FCA requirement is that commission disclosure must; 'make clear, to the extent an average customer of the firm would understand, the nature of the service that the firm provides.' The FLA guidance notes, 'the essential purpose of the disclosure rules is that firms should elaborate on the nature of commission arrangements where these could affect the customer's willingness to transact.' 

To protect themselves, dealers must be confident that their commission disclosures are prominent and sufficiently detailed and that they are ready to share the commission value accurately on request."

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