MotoNovo has urged dealers to ‘be prepared’ for car buyers' greater levels of interest in a dealer’s finance commission.
The warning follows as the Financial Conduct Authority (FCA) ban on all discretionary commission models in motor finance came into force on January 28, 2021.
The changes, explored in the December digital edition of AM Magazine, include banning pricing models which link dealer commission to an interest rate and clarifying commission disclosure rules.
MotoNovo said the FCA’s new Consumer Credit Sourcebook (CONC) rules are designed to ensure consumers have a better understanding 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.
Research by Close Brothers Motor Finance revealed that a third (34%) of British car buyers expect dealers to earn commission on vehicles bought on finance, and a further 28% don’t mind so long as they’re informed.
MotoNovo said that dealers should anticipate more requests for full commission disclosure amid showrooms reopening on April 12.
Stephan Bothma, chief risk officer at MotoNovo Finance, said: “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.”
“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.”
In response to the FCA ban, Alphera Financial Services confirmed it will be offering one rate of finance and one rate of commission from January 2021.