Context
During a speech at the Investment Association Annual Dinner, Mansion House, FCA Chief Executive Nikhil Rathi has provided comments about the ruling from the Court of Appeal regarding motor finance sales and commissions. While the speech itself contains little else of note, the comments regarding the motor finance case are worth noting as an indication of the FCA’s position.
Key points to note and next actions
Rathi points out that the Court of Appeal ruled it was unlawful for car dealers to receive a commission from a lender providing motor finance to a customer, unless it was disclosed to the customer and they gave informed consent to the payment. The ruling, he notes, is rooted in the longstanding common law principle of fiduciary duty, rather than FCA rules, which means that the broker (or car dealer in this case) must act in the best interests of the customer and not put themselves in a position of conflict.
From an insurance distribution perspective, there are clear similarities in the principles behind this case and the receipt of commissions for arranging premium finance. As the lenders in this case intend to appeal, the FCA is still awaiting clarity on whether this is the courts’ final word on the issue.
Rathi said, in response to some in the industry asking that the ‘pause’ be expanded to cover complaints relating to other types of commission in motor finance, that the FCA is considering this carefully and working through the potential benefits and risks of doing so. He also stated that the Court of Appeal has made the law clear and, if that is not challenged further, then firms need to handle any complaints in line with that.