In a surprise turn of events, the Finance & Leasing Association (FLA) has this month decided against mandating commission disclosure in its Code of Conduct, indicating that they will instead wait for the FCA to consider enforcing disclosure through regulation (with an FCA update expected later this year).

This decision was communicated through a private note to members and, with expectations that mandated disclosure was to be introduced, has caught some off-guard.

Some asset finance lenders are said to be frustrated by the shift whereas others, including vehicle finance provers are said to be more positive. No specific reasons were given for the change, although commentators consider that the final goal is still full disclosure.

Those in favour of commission disclosure say it brings a level of transparency which can help borrowers understand potential conflicts of interest and make more informed decisions. It can increase trust in the lending process and, by mandating across the board, greater consistency would be achieved. 

Those supporting the status quo argue that competitive advantage and confidentiality would be affected and also that a misunderstanding of commissions may lead borrowers to equate higher commissions to higher costs. Commission disclosure may require lenders to adopt a uniform approach to lending which may reduce flexibility.

In either case, clarity remains key. Watch this space for updates!

Ruth Nevitt, Solicitor