Disclosure would not apply because objectives are still
to be met, says Ian Beardmore.


Photo of Ian Beardmore, operations manager at The Co-operative Motor GroupThe
crux of the commission disclosure (CD) discussion lies with the
declaration of volume bonus more than true commission in a majority
of cases. For example, a dealer pays 5% flat for his money and
receives 5% volume bonus. If he has a 2% rate spread and 100% DIC
he would make £800 commission and £500 volume bonus on a £10,000
deal over four years. In reality the commission is 8% of the amount
borrowed, which is a reasonable percentage of commission to

Consider disclosing to a customer
you have just arranged them a £10,000 loan and are going to receive
£800, which would be justifiable. Now think about telling them you
have earned £1,300, some 13%, and that might be harder to

The problem with volume bonus is,
in its true form, it should be ‘a bonus paid on achievement of a
specific volume’, but now the reality is that, over the years, this
has become an expectation. It is almost a given, irrespective of
the volume achieved against the target, and now even payable
quarterly or, in certain circumstances, monthly, which of course is
used to aid cash flow. If volume bonus was reverted back to its
true purpose – so that when the volume is achieved the payment is
made – then surely we could not be required to disclose this as
commission, because it is not guaranteed until the objective has
been met or the deal has run its term. Based on a £10m, 12-month
deal a 5% volume bonus would pay £500k. Let’s say every deal was
the same amount with the same rate spread it would yield £800k in
commission and £500k in volume bonus.

In the true context of volume bonus
the £500k wouldn’t be payable until the end of the 12 months,
subject to the £10m target being achieved, which works out at
£41,666 a month.

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Bigger dealer groups with
proportionate figures could budget accordingly, but dependence on
what is required to disclose this solution would seem the most
reasonable course. However, we will have to see if the respective
industry campaigners can enlighten the legislators that such a
process is reasonable and fair. Also, I’m sure that dealer groups,
big and small, would not be as willing to accept this resolution
based on cash flow.

Ian Beardmore is operations
manager at The Co-operative Motor Group