The FCA have made it a requirement that firms clearly disclose the nature of commission or remuneration they receive from lenders and product providers. This requirement takes effect immediately and we have revised the Terms of Business document to reflect this new rule. We have also provided below the appropriate text for you to include in the Terms and Conditions on your website.
In July 2020, the FCA published Policy Statement (PS20/8) on motor finance discretionary commission models and consumer credit commission disclosure. The FCA identified that some motor finance brokers received commission linked to the interest rate that customers pay, which created an incentive for the broker to sell more expensive credit to customers. This practice is not in the best interests of the customer and does not treat them fairly. As a result, the FCA have now banned discretionary commission models. In addition, the FCA have made it a requirement that firms clearly disclose the nature of commission or remuneration they receive from lenders and product providers. This requirement takes effect immediately and requires a paragraph to be added to your Terms of Business document and to the Terms and Conditions on your website. A revised Terms of Business document reflecting this new requirement is provided.
The following text should be included in your Terms & Conditions on your website.
“Commission disclosure: We are a credit broker and not a lender. We have access to an extensive range of lenders. Once we have assessed your needs, we will recommend a lender(s) that provides suitable products to meet your personal circumstances and requirements, though you are not obliged to take our advice or recommendation. Whichever lender we introduce you to, we will typically receive commission from them after completion of the transaction. The amount of commission we receive will normally be a fixed percentage of the amount you borrow from the lender. Commission paid to us may vary in amount depending on the lender and product. The lenders we work with pay commission at different rates. However, the amount of commission that we receive from a lender does not have an effect on the amount that you pay to that lender under your credit agreement.
For sales of non-investment insurance products such as life and critical illness insurance, we are remunerated by commission from the insurance provider. Commission will normally be based on a percentage of your premium for a set period of time.”
You can find a copy of the revised Terms of Business template in BOX
(i) Please note that the Terms of Business document is a generic document for use by all Appointed Representative firms. The only changes permitted in the Terms of Business document are to the fields marked in red. There should be no need to make any other amendments to the document.
(ii) It is a breach to alter the Terms of Business document, other than the fields marked in red, unless where in exceptional circumstances, you have been given written authority from Connect Compliance.