We are pleased to share that Alvarez & Marsal’s report on commission risks in motor and asset finance risks was recently featured in UK Finance.

In our blog post, “The Quantum dilemma: Navigating commission risks in motor finance” we discussed the significant challenges faced by the motor finance industry due to commission risks and potential consumer redress.

Our report discusses:

1. UK Supreme Court Ruling: That is set to decide if motor dealers owe a fiduciary duty to customers, which could lead to significant compensation claims for consumers affected by discretionary commission arrangements.
2. Operational Challenges: Increased operational expenditures and cautious lending practices due to litigation and redress threats, impacting profitability and financial stability.
3. Regulatory Scrutiny: Ongoing scrutiny and potential FCA reviews posing operational and financial risks for lenders and brokers, with the possibility of an industry-wide redress scheme.
4. Disclosure and Compliance: Finance providers now must assess the adequacy of commission disclosure in sales processes, with the Supreme Court’s decision potentially influencing the FCA’s redress approach.
5. Future of Lending: As non-performing loans have risen, lenders might be relying on more expensive funding options, impacting profitability, when alternative and potentially cheaper and more flexible funding solutions like securitisations should be explored.

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