Commission disclosure when the client asks "who pays you?"
Els is a tied credit intermediary for one lender. She advises a young couple, Tom and Ines, on a €30,000 renovation loan. During the meeting Tom asks directly: "Do you get paid by us or by the bank, and how much?" Els answers: "Don't worry, it costs you nothing - the bank pays me." She does not state the amount or basis of the commission. Later in the meeting she recommends a 10-year fixed loan at 5.1% APR. She has not compared any other lender because she is tied. She does not mention that she is tied to this one lender, and she does not give them a written overview of costs. The couple signs the same day. Two weeks later they discover a competing lender offered 4.6% APR for the same profile.
1. Evaluate Els's answer to Tom's question about remuneration. What should she have disclosed?
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Els's answer is inadequate. "It costs you nothing - the bank pays me" is misleading in substance because the commission is ultimately embedded in the cost of the credit the clients pay. When a client asks directly, the intermediary must give clear, accurate information on the nature and basis of the remuneration and, where required, the amount.
She should have disclosed:
- That she is remunerated by commission from the lender, not by a fee from the clients.
- The basis of that commission (e.g., a percentage of the loan amount) and, where the regime requires it, the amount or a meaningful indication of it.
- That this creates a conflict of interest because her remuneration depends on the lender she is tied to.
- That she is tied to a single lender, so she is not comparing the market.
Telling clients "it costs you nothing" while receiving a lender-paid commission on a €30,000 loan suppresses exactly the information the question was designed to elicit.
2. What other conduct failures are present, and what would a compliant process have looked like?
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Other failures:
- Non-disclosure of tied status: the couple was not told Els represents only one lender, so they could reasonably believe they were getting market-wide advice.
- No comparison or justification: recommending 5.1% APR when a 4.6% alternative existed for the same profile, without disclosing the limitation, is inconsistent with acting in the client's best interest.
- No written cost overview: the clients signed without a clear written statement of the total cost and the intermediary's remuneration.
- Same-day signature: no reflection period or documented consideration of alternatives.
A compliant process:
- Disclose tied status and the single-lender limitation at the start, before advice.
- Explain remuneration basis and amount in writing, and flag the conflict of interest.
- Conduct and document a needs assessment and explain why this lender's product is appropriate despite the narrower choice.
- Provide a written overview of costs, APR, and total amount repayable.
- Give the clients time to consider before signing, and record their decision.