On Friday the NACFB wrote to all Members making them aware of the changes affecting regulated firms regarding disclosure of commissions.
New FCA regulations came into force last Thursday mean that all regulated brokers will be subject to new rules in relation to how commission received from lenders is disclosed to clients. Lenders have already started reviewing their broker documentation to reflect these changes.
To ensure industry cohesion and adherence, we strongly advise that you:
- Prominently disclose to a customer, in good time, before a credit agreement or a consumer hire agreement is entered into, the existence and nature of any commission or fee or other remuneration payable to the credit broker by the lender or owner or a third-party.
- State whether the commission or fee could affect the impartiality of the credit broker in recommending the credit agreement or the consumer hire agreement.
- State whether the commission paid will have a material impact on the customer’s transactional decision to enter into the credit agreement or the consumer hire agreement.
- Ensure that your financial promotions indicate to the customer in a prominent way:
- The existence and nature of any financial arrangements with a lender that might impact upon the firm’s impartiality in promoting or recommending a credit product.
- Whether the firm acts independently or not.
- Whether the commission received may vary depending on the lender or product or other factors.
Full details of the rules can be found at CONC 4.5 and at CONC 3.7.
The NACFB has amended both the Terms of Business Agreement and Suitability Letter template documents to ensure that Members are compliant with these changes. You can download both of these revised templates here.
Although this only applies to regulated firms, the NACFB would expect to see all firms adopt this approach as a best practice.
If you wish to receive further support or guidance, do please contact the team via compliance@nacfb.org.uk