IMPORTANT INFORMATION - MOTOR FINANCE COMMISSION
Discretionary Commission Arrangements
On 11 January 2024 the FCA announced that it was taking action regarding historic motor finance business that included the use of Discretionary Commission Arrangements between the lender and the broker.
On 24 September 2024, the FCA released the following update on their ongoing review, confirming the extension originally proposed on 30 July 2024:
- The FCA intends to share their findings and next steps in May 2025.
- The complaint handling pause is still in place and the deadline for firms to respond to customer complaints has been extended to after 4 December 2025. This pause only applies to complaints involving discretionary commission arrangements between lenders and brokers.
- Customers will have more time to refer complaints to the Financial Ombudsman when a final response is issued. Instead of the usual 6 months, customers have until 29 July 2026, or 15 months from the date of the final response letter, whichever is later.
This action includes a widescale review of past business arrangements, at some lenders, to establish whether consumers have been disadvantaged by these arrangements. In the meantime, the FCA has introduced a pause to the 8-week deadline normally allowed for firms to deal with complaints where there was a Discretionary Commission Arrangement between the lender and the broker.
Advantage Finance can confirm that it has never used any form of Discretionary Commission Arrangement and has never allowed the broker to influence the interest rate for any potential customer. Therefore, this action being taken by the FCA does not apply to Advantage Finance and any of its past business.
To find out more about this subject and the action being taken by the FCA please click here.
Non-Discretionary Commission Arrangements
On 25 October 2024 the Court of Appeal issued a decision relating to the payment of commission on motor finance agreements in which it found that the payment of any form of commission by the lender to the broker required fully informed consent by the borrower. This decision has overturned many years of established agency principles and goes beyond the requirements of previous regulatory expectation.
We understand that the lenders involved intend to appeal these decisions to the Supreme Court and, in the meantime, the FCA has announced proposals for its extension to be widened to also include complaints about non-discretionary commission arrangements.
Advantage Finance can confirm that, where a commission has been paid, it has been on a flat-fee basis, which is a form of non-discretionary commission arrangement. Any complaint received about the payment of commission will be handled in in accordance with our regulatory obligations however will be subject to the FCA extension, if one is introduced.
Please read our frequently asked questions below for more information.
Commission is the payment of a fee to a motor dealer or broker when a customer takes out a finance agreement.
The payment of a commission is the cost a lender bears for the acquisition of new customers. This is an alternative to other types of cost such as direct advertising (Internet, TV, Radio etc) or employing a high street presence and the additional staff required to undertake the work done by the broker. It also helps the broker to cover their own costs of advertising and for the work that they undertake in finding the right lender.
No. Our interest rates are set based only upon our assessment of credit risk. Customers may apply for finance directly to us and not use a broker at all, however the interest rate will be the same.
No. Our interest rates are set based only upon our assessment of credit risk. Customers may apply for finance directly to us and not use a broker at all, however the interest rate will be the same.
The amount of commission can vary depending on the arrangements between the broker and the lender.
The existence of a commission arrangement was made clear in the pre-contractual information that we sent directly to you, prior to you taking out the agreement. You agreed to the payment of the commission when you entered into the agreement. We were not required by the FCA to explicitly state the amount of the commission.
No. Claims Management Companies do not result in any better outcomes and, where a complaint is upheld, take a significant percentage of any redress. By contacting us directly with your concerns we can communicate directly and efficiently with each other.
Please click here to see or complaint procedure. This tells you everything you need to know about how to get in touch.