Fixed commission with BMW Financial Services – excluded from FCA scheme

wolfman310

BMW FS confirmed fixed commission on two of my agreements.
Because they’re a captive lender I fall outside the FCA redress scheme, and I’m not at the high commission threshold either I would suspect.

The Supreme Court ruling in Johnson v FirstRand covers fixed commission regardless. The FCA just chose not to include captive lender cases in the scheme.
Has anyone else been left in this gap, and has a view on next steps, I am guessing FOS?

Thanks.

dunstonh

Has anyone else been left in this gap, and has a view on next steps, I am guessing FOS?

The FOS won't rule in your favour as they cannot override the FCA.

The Supreme Court ruling in Johnson v FirstRand covers fixed commission regardless. The FCA just chose not to include captive lender cases in the scheme.

Seeing as you quote that case, you must already know that it was about high commission and not the fact there was a commission.

wolfman310

Thanks for the reply.

Can you point to anything that says the Financial Ombudsman Service can’t consider complaints outside the FCA redress scheme? My understanding is that FOS determines cases based on what is fair and reasonable, taking into account the law, including Supreme Court judgments.

In Johnson v FirstRand Bank Ltd, the Supreme Court’s analysis under the Consumer Credit Act 1974 s.140A wasn’t limited to “high commission” cases. The focus was on whether the relationship was unfair, particularly where commission and its implications were not properly disclosed, preventing informed consent.

On that basis, I’m struggling to see why the reasoning wouldn’t also apply where a fixed commission existed but was not disclosed at all.

Happy to be corrected if there’s something I’ve missed as it is important for all those in the same position as I am guessing loads of people are also confused

dunstonh

Can you point to anything that says the Financial Ombudsman Service can’t consider complaints outside the FCA redress scheme? My understanding is that FOS determines cases based on what is fair and reasonable, taking into account the law, including Supreme Court judgments.

That is not correct but it had got vague over recent years and the rules for the FOS are being changed

However, the FOS cover the point here:

https://www.financial-ombudsman.org.uk/businesses/resolving-complaint/understanding-compensation

Consumer redress schemes

If there have been widespread regulatory failings by a business, the FCA may require it to enter a consumer redress scheme. This will include a set of rules that the business has to follow when compensating its customers for a specific issue.

If there’s a redress scheme in place, we’ll usually be bound by the rules for that particular scheme. However, this only affects complaints that are within the scope of the consumer redress scheme, so we’ll deal with any other complaints about your business as normal.

In Johnson v FirstRand Bank Ltd, the Supreme Court’s analysis under the Consumer Credit Act 1974 s.140A wasn’t limited to “high commission” cases. The focus was on whether the relationship was unfair, particularly where commission and its implications were not properly disclosed, preventing informed consent.

The Supreme Court judgment specifically upheld Mr Johnson's claim because of a combination of aggravating factors: a discretionary commission arrangement at an exceptionally high level (around 55% of the total charge for credit), a hidden exclusivity/right of first refusal agreement, and poor disclosure.

On that basis, I’m struggling to see why the reasoning wouldn’t also apply where a fixed commission existed but was not disclosed at all.

The case you were looking at was not about fixed commission. Instead, the companion case Hopcraft v Close Brothers — which did involve a fixed commission — was rejected by the Supreme Court, with the Court finding that a disclosure line saying the dealer "may receive commission" was sufficient and the arrangement was not unfair.

In practice, where a redress scheme is in place the FOS will usually follow the rules of that scheme for complaints that fall within its scope, and deal with other complaints as normal. You are still free to try the courts if you wish