Legal firm MILS has issued guidance to dealers on motor finance Discretionary Commission Claims, a huge issue for the retail sector in the light of the Court of Appeal ruling.
The Court of Appeal upheld an appeal against Close Brothers, First Rand Bank and MotoNovo Finance ruling that motor dealers acting as credit brokers have a duty of loyalty to their customers.
The decision could pave the bay for billions of pounds to be paid out to customers although Close Brothers has said it is going to the Supreme Court to appeal the decision.
MILS has taken an in depth look at the issue and told dealers: “Remember, this is only half time. This will be referred to the Supreme
Court who will have the final say.”
On a practical level it said:
- “Continue to maintain deal files and records: We advise that you make sure you are keeping all dealer files and paperwork for sales between 2013 and 2021, and particularly details of any disclosure (PID documents etc…), at what stage of the deal these were provided, and whether these were signed by the customer.
- “Enhance Your Contractual Disclosure Language: Go beyond “fine print” language. Clearly explain to customers any commissions, how they’re calculated, and any limitations or ties with specific lenders (particularly if there are any obligations to give a lender a first-right of refusal or similar preferential treatment). Transparency is not just a safeguard; it’s a trust- building tool.
- “Train Your Team: Ensure that your sales and finance teams understand the importance of disclosure and can clearly explain commission structures to customers. Demonstrating clear commitment to training and commitment to verbally explaining commissions to customers will reduce risk and strengthen your position should any disputes arise.
- “Formalise Policies and Procedures: Have clear internal policies for structuring and disclosing commissions. Documenting these policies can be valuable if you need to demonstrate good faith in compliance.”
The full advice is available here