Commission disclosures must be prominent and sufficiently detailed for consumers, or risk facing action from the Financial Conduct Authority (FCA), MotoNovo has warned.
The recently implemented FCA rules on commission disclosure provide significant discretion on how disclosures are made. However, the authority has warned that a lack of prominence at the crucial stages places dealers at risk of potential FCA action and claim management companies (CMC) campaigning activities.
One particular CMC is currently campaigning across social media that: “Qualifying PCP holders are claiming £1000s due to undisclosed commissions on their car deal.”
Commenting on the campaign, MotoNovo chief risk officer, Stephen Bothma, said: “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 as the “right thing to do” Bothma adds: “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.”
The 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. There is no necessity to provide the commission’s monetary value unless asked by the customer.
Upon request, dealers must be ready to share commission values promptly, with details on the precise amount likely to be earned.
Reinforcing the purpose of the updated rules, Bothma continued: “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.”
In March, MotoNovo also warned that dealers need to be ready for a greater level of consumer interest in their finance commissions, driven by increased media interest and new FCA regulations.
The prominence required in disclosing the existence of commission will inevitably lead to more people asking ‘how much?’.