Temporary pause on new finance proposals

On 25 October 2024 the UK Court of Appeal published a judgment on three cases relating to motor finance agreements where it upheld the claimants’ appeals. 

The Court of Appeal judgment found that when acting as credit broker, a dealer or motor finance broker:

• Cannot lawfully receive a commission from a lender without obtaining the customers fully informed consent to the payment. 
• Owes a fiduciary duty (a duty of loyalty) to act in the customer’s best interest.

All transactions will now need to include our signed commission disclosure consent form. 

The commission disclosure consent form will explain to the customer:

• The total commission payable on the customers agreement.  
• The relationship between the credit broker and Aldermore.
• The calculation of the commission for that agreement.

The customers will then be asked to provide their explicit consent to the payment of commission before they can proceed to signing the agreement. 

We now have two versions of the commission disclosure consent form for; 

• Cars, vans and leisure vehicles only
• All other assets

These are to be manually completed by the broker and customer and returned with payout packs and are effective immediately for all deals. 

We’re working to enhance Asset Backer to make these new versions available as soon as possible.

Please click here to download our commission disclosure consent forms.

Our fees remain as:

• Document fees will now be £100, and will be fixed, with no fee-sharing. 
• OTP fees will now be £10+VAT.

You have a continued obligation to comply with law and regulation under the Financial Conduct Authority’s Consumer Credit Sourcebook.  Although Aldermore are providing a commission disclosure journey post-acceptance, they do not supersede your obligations to a customer pre-acceptance.  The following is a summary of your obligations, this list is not exhaustive, only you can determine the full extent of the changes you’ll need to make.  

• You are required to prominently disclose to the customers the existence, nature and amount of the commission you will receive in all circumstances and for all products.  This disclosure must be provided in good time before an asset finance agreement is entered into and therefore require you to provide this during the sales process ahead of acceptance and pre contractual documentation.  
• A customer must have enough time and information to make an informed decision, and the customer must have the ability to not proceed with the transaction 
• You must fully disclose the services you are providing to the customer and the nature of your lender relationships, for example:

 - That you are acting as a credit broker and whether or not you are providing impartial or independent financial advice of recommendations 

 - That you do not offer a whole of market financial solution  

 - Explain any contractual relationship requiring support of a preferred lender (such as wholesale funding, term loans, advance commission)  

 - Where you work with a limited lender panel, provide details of the panel 

 - If you are not searching all of your panel for quotations, you should explain your reasons,.  

- If you work with a finance broker, advise the customer who the broker is and when you would refer the customer’s application to the broker. (If you work with a broker, you must ensure the broker is also complying with its obligation to disclose commission and obtain the customer’s fully informed consent) 

• You must explain that the finance product you are offering may not be the best product available to the customer on the open market  
• You would need to remind customers that they have the right to ask questions, if they do you will be required to answer them  
• You should consider whether there are any other circumstances which could affect your impartiality or ability to act in the customer’s best interests and tell your about this 
• Any disclosure you make should be prominent and easily understood by customers.  
• It is your responsibility to keep a record of the explanations provided to the customer and to be able to evidence that consent was obtained from the customer.   
• It’s your responsibility to ensure that all your staff are trained on the new requirements, the need for disclosure and consent, and that they can clearly explain the commission model that your brokerage is on. A record of this training should be retained.   

You must ensure that you are fully complying with all of the requirements relating to commissions.