Kew Vehicle Leasing claims to have become the first leasing broker to openly disclose the amount of finance commission it receives on all regulated Personal Contract Hire (PCH) agreements.
The business will also disclose the lender as a matter of course as part of a policy shift which managing director Lee Jones said had the Financial Conduct Authority’s (FCA) desire to see customers treated fairly through transparent transactions at its core.
While Kew Vehicle Leasing is a leasing broker and not a car finance broker, the leasing provider insists that it is “a bold step” which will distance it further from finance brokers subject to FCA scrutiny.
Managing director, Lee Jones, said: “I suspect customers will be surprised at the level of commissions, which are not in the thousands of pounds that customers assume. On average it is one to 2% of the vehicle P11D value.”
He added: “It’s a significant step for us to be first to disclose commissions. We are leading the way in the leasing broker market.
“If you look at the way Independent Financial Advisers work - disclosing the lender and the amount of commission payable on, say, a mortgage quotation - it is made quite clear the amount being paid for the service.
“I don’t see leasing brokers being any different - why shouldn’t we provide the same level of transparency?”
In October, the findings of the FCA’s investigations into motor finance triggered the start of a new set of legislation for the sector, with a proposed ban on APR-based discretionary commission models now under consideration.
The FCA will not compel car dealers to disclose the finance commission earnings but it is still taking action to mandate early disclosure to consumers that the dealer will earn commission from sales.
“We are concerned that consumers are not being provided with the right information about commissions at the right time,” said the FCA.
“This can limit consumers’ ability to make informed decisions and, ultimately, choose the deal that is right for them.”
Firms are interpreting its current commission disclosure rules inconsistently, it said, and often disclosure is not early enough in the process to influence a customer’s decision making.
So the FCA plans to clarify CONC 3.7.4G and 4.5.3R “to better reflect our intention that customers receive more relevant information about the existence of commission”.