How should the remuneration be described in the disclosure?
The disclosure should be displayed as a single monetary figure, alongside the method of calculation. Where appropriate, the remuneration amounts should be itemised. For example, commission on the agreement and a panel fee or flat administration fee for processing the application on behalf of the lender should be disclosed separately.
Consistent with CONC 4.5.4R, if the precise amount to be paid is not known at the time of disclosure, disclosure should be made of the method of calculation and likely amount of the remuneration instead, as long as the estimate of the amount is reasonable and the customer is informed that it is an estimate. This would include disclosing, for example, the amount of any future volume-linked payments where these are likely to be paid. If disclosing an estimate of the likely amount, it should be acceptable also to disclose this as a range of amounts, as a maximum amount or as a maximum and minimum amount.
When should the commission be disclosed?
The key regulatory considerations are that disclosures are made in good time before the agreement is signed and that they are prominent.
The lender must ensure that they implement and monitor compliance with the disclosure requirements (both regulatory and commercial); there should be consistency with intermediaries’ own businesses processes for disclosure.
In many cases this will mean making these disclosures at the pre-contractual explanation or earlier quotation stage or, as long as the disclosures are in good enough time and prominent, at the later document signature stage. However, alternatives to this may be more appropriate in some markets (e.g. the non-prime market) where additional considerations will be to ensure that a good overall customer journey is maintained.
Consent
An effective and compliant disclosure is, of course, a necessary prerequisite for an informed and complaint consent.
The consent form should not be long or onerous. The shorter and clearer the form is, the more likely it is to lead to an authentic and informed consent. In practical terms, the following are examples of elements on a consent form that are likely to lead to effective and compliant consent:
- acknowledgement of the role of the intermediary and that the commission arrangements have been explained;
- a description of the role of the intermediary e.g. whether they are impartial, on whose behalf they are working, how their panel works, whether independent advice is being given;
- a description of the nature of the commission arrangement and a statement of the amount (or likely amount) of commission;
- an explanation as to whether the fee payable does or does not impact the amount to be paid by the customer;
- a statement whether a fee is payable by the customer, and
- signatures by both parties.