Lenders upgrading tech to meet court mandate on commission disclosure, says iVendi

Lenders are ramping up their technology systems to provide timely, transparent commission disclosures to customers following the recent Court of Appeal ruling on motor finance, iVendi reports.

This shift aims to ensure compliance with the industry-wide consensus on "no detriment" disclosure at the critical decision-making stage, though achieving precise commission calculations remains a challenge for some lenders.

James Tew, iVendi CEO, said: “As everyone in motor retail knows, this has been a highly demanding few weeks following the Court of Appeal decision, with motor finance providers and intermediaries such as dealers working hard to meet the demands of the court of appeal decision.

“Initially, they did this in all kinds of ways – from quickly modifying their existing technology to inserting old-fashioned paper systems – but now they are looking for longer term solutions.

“A consensus has emerged around the concept of ‘no detriment’ and this makes a lot of sense. However, for some lenders and their technology, there are challenges around being able to calculate commission accurately before the deal is made, especially where risk-based pricing and third-party APIs are in use.”

Tew said that resolving this issue was essential before the newly required levels of customer transparency could be delivered.

“Using the lender finance agreement as a safety net, upfront disclosure serves as comprehensive evidence for all stakeholders involved in the motor finance process and covers potential legal scenarios. This is essential to safeguard not only consumers but also lenders, retailers, and individuals in motor finance roles at dealerships.”

Tew added that other issues were coming into play following the court of appeal decision, including the need to separate compliance from legal needs, and to compile substantiating evidence.

“Everyone involved in these processes needs to ensure that in meeting the new legal needs, they don’t lose sight of compliance with existing regulations. This is especially important when it comes to evidencing everything that you do. Claims of adherence hold little value without substantiating evidence.”

“Our systems allow this problem to be resolved but elsewhere, some lenders are facing challenges. Although providing commission estimates is a potential solution, it unavoidably introduces ethical concerns. Ultimately, ensuring transparency by disclosing actual commissions and their calculation mechanism, and obtaining explicit customer consent, is now paramount.”