Car finance providers are slowly getting their systems back online in the wake of the shock Court of Appeal ruling on Friday.
A website set up by iVendi, a supplier which provides car dealers with online finance solutions, shows four out of 23 finance providers are now operational.
The car finance market has been paralysed this week with many dealers unable to deliver new and used cars with finance agreements as lenders halted payouts.
As of this morning, iVendi says MotoNovo, Mann Island Finance, Northridge and V12/Moneyway are all still pausing finance deals.
Auto Union said it had reviewed its portfolio and can now ‘continue trading with partners’, while others including First Response, Oodle, Santander, Blue Motor Finance and BNP were all trading now with changes in place.
Yesterday, BMW confirmed to Car Dealer it had brought its systems up to date to comply with the ruling and was able to write business again.
BMW Group Financial Services resumed business after making ‘changes to products, business processes, customer disclosures and consents related to commission payments’.
This week has been chaotic for finance providers and their partners as they pulled deals following the Court of Appeal’s decision that ruled against three finance companies.
In Friday’s decision, the Court of Appeal ruled in favour of three customers which said ‘a broker could not lawfully receive a commission from a lender without obtaining the customer’s fully informed consent to the payment’.
The judges went over the heads of the regulator, the Financial Conduct Authority, which had previously issued advice to lenders on how to disclose commissions.
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The industry has been trying desperately to work out how to legally provide finance since then. Some providers, including Black Horse and Stellantis, are believed to have paused commissions payments to dealers while they assess how to comply and update paperwork.
Auto Trader held a webinar this week, which included Adrian Dally, director of motor finance and strategy from the Finance and Leasing Association.
The panel discussed how dealers could stay on the right side of the law following the court case, but the firm stressed it ‘does not constitute legal advice from Auto Trader’.
In a round-up report of the event, the firm said: ‘The judgment was made based on the law of secret commission and fiduciary duty.
‘The significance of the case is that it now means that retailers and brokers likely owe a duty to give advice, recommendation or information on a disinterested basis and a fiduciary duty to their customers when providing finance.
‘Further, that disclosure of the possibility of the payment of commission in a lender’s terms and conditions would not necessarily be sufficient to negate secrecy.’
The panel said FCA rules from January 2021 requiring brokers to disclose the ‘existence and nature’ of commission is ‘no longer sufficient’ following the Court of Appeal ruling.
The firm added: ‘The ruling provides clarity that the amount and the calculation of the commission is required alongside the customer’s informed consent to the payment of commission.
‘Any writing of new UK motor finance agreements will be unlawful if there is non-compliance with these new requirements.’
Auto Trader and its panel of experts believed there was two options for lenders and car dealers:
- Don’t charge or accept commission on finance agreements
- Disclose the existence, nature and amount of commission and obtain informed consent from the customer
Auto Trader added: ‘What is required is that the customer allows the commission to be paid “with full knowledge or all the material circumstances and of the nature and extent of the brokers interest”.’
Yesterday, iVendi CEO James Tew told Car Dealer that lenders had been working hard to update their systems but there was no real clarity on exactly how and where the disclosure of commissions needs to be made.
‘A lot of finance companies are trying to work out what the right way is to do this,’ he told Car Dealer.
‘The issue is the commission needs to be disclosed in a “timely manner”. That could mean at the point of handover for the car that is too late.
‘The legal departments and compliance teams are very worried about getting it right.’
Finance firms are said to be concerned about how they lay out the disclosure of commissions in agreements. The Court of Appeal judges were said to have paid close attention to the wording on contracts, which has got finance firms’ legal departments particularly concerned.
Friday’s case is likely to go to the Supreme Court, which could overturn the ruling, but that will likely take months.