Updates to this story
There will be changes continually to the market as this story unfolds. We’ll update you below as they happen.
- Last night (30 October) urgent meetings took place between Treasury officials and the FCA to contain the potential fallout from the court ruling
- For more on this story read the i here: Treasury holds urgent credit finance talks as car deals dry up
- And The Daily Telegraph here: Car dealerships in chaos as shock ruling leaves market at risk of collapse
- Santander suspends partner programme
- Novuna moves to flexible cap on non-regulated commission up to £1,500
- Lex Autolease moves to 0% commission (30 Oct)
- Arval – no action
- Statement by the FCA’s Chief Executive – read it here
- Martin Brown is Chair of Fleet Alliance. Read his thoughts on non-reg business versus motor finance.
THE Court of Appeal ruling on Johnson v FirstRand Bank (MotoNovo), Wrench v FirstRand Bank and Hopcraft v Close Brothers has been reverberating around brokers and lenders since it was announced on 25 October 2024.
Although it was a judgement on discretionary commission models and regulated agreements within the motor finance industry, there’s no question it will now tip over into the leasing broker sector.
At the moment there’s a period of quiet while funders consider the implications of the judgement – although many had been working towards such an eventual outcome anyway.
Novuna Vehicle Solutions, who introduced fixed commissions on regulated business at the beginning of August, fixed at £750 per vehicle contract communicated with brokers on Monday morning with guidance on gaining consent from drivers. And today (Tuesday) Broker News understands that Alphabet has also communicated with its broker Partners regarding the judgement.
Lloyds Bank, owners of Black Horse Finance and Lex Autolease, said in a statement that it was assessing the potential impact of the decisions.
It went onto add:
“The Court of Appeal has determined that motor dealers acting as credit brokers owe certain duties to disclose to their customers commission payable to them by lenders, and that lenders will be liable for dealers' non-disclosures. This sets a higher bar for the disclosure of and consent to the existence, nature, and quantum of any commission paid than had been understood to be required or applied across the motor finance industry prior to the decision. Our understanding of compliant disclosure was built on FCA / regulatory guidance and previous legal authorities. These decisions relate to commission disclosure and consent obligations which go beyond the scope of the current FCA motor commissions review.”
Meanwhile, MotoNovo Finance and Close Brothers have suspended business while Broker News understands that other broker funders are in the process of suspending business while changes to the business model are carried out in light of the legal judgement.
The BVRLA said it was working on a considered response which it will share with members later. It had taken legal advice as well.
The FCA, meanwhile, said it was considering the court’s decision.
The Broker News view on broker commissions
- First, the statement of commission must be disclosed and consented to – because it’s now law
- Some funders may take the view that the only way to protect themselves is to introduce fixed commission on both regulated and non regulated business
- In our opinion it is unlikely that we will move to a homogenised non-regulated market with all capped commissions as this would be anti-competitive; it would also not reflect the level of risk that some brokers and funders undertake to deliver certain fleet deals. The same is also possible for the regulated market, too, of course
- There is perhaps scope for leasing brokers to reframe their business relationships, by charging more for the service provided (access to discounted vehicles, a panel of funders, fleet management advice) rather than using the commission model
- Mortgage brokers, for example, disclose the amount of commission charged, but also a fee for services provided which can be a flat rate or a percentage of the amount borrowed
- We can expect a period of reflection while consideration is given to the verdict and how it fully impacts both brokers and funders
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Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
