When consumers take out financial products such as loans, finance agreements, or insurance, they often do so on the assumption that any advice or recommendation they receive is based on their best interests. However, this is not always the case.
Undisclosed commission claims have attracted increasing attention because they raise important questions about transparency and fairness. They focus on whether consumers were properly informed about how intermediaries were being paid and whether that lack of disclosure created an unfair relationship.
CRS Solicitors regularly see cases where individuals were unaware that commission played a role in the financial products they were offered. This article explains what secret commissions are, how secret commission claims arise, and what they may mean for consumers across a range of financial products.
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Secret commissions refer to payments made by a lender, insurer, or product provider to an intermediary that are not properly disclosed to the consumer. The concern is not that commission exists, but that it is hidden in circumstances where transparency would reasonably be expected.
What a Secret Commission Means for Consumers
In practical terms, a secret commission may involve:
a payment made to a broker or intermediary that the consumer was not told about
a financial incentive that may affect how a product is recommended
a situation where advice appears independent but is influenced by undisclosed payments
a lack of transparency that prevents the consumer from making a fully informed decision
Importantly, not every commission arrangement gives rise to a claim. Many commissions are lawful and properly disclosed. Undisclosed commission claims arise where the lack of disclosure creates a potential conflict of interest or raises questions about fairness [1][2].
How Secret Commission Claims Arise
Secret commission claims usually arise where consumers later discover that an intermediary involved in arranging a financial product received a payment that was not disclosed at the time. These situations often develop gradually and may not be obvious to consumers until long after the agreement was entered into.
Commission Paid to Intermediaries Without Disclosure
A common scenario involves commission paid by a lender or product provider to a broker or intermediary without the consumer being clearly informed. Where an intermediary appears to be offering independent advice, undisclosed payments can raise concerns about whether recommendations were influenced by financial incentives rather than suitability.
Conflicts of Interest in Product Recommendations
Hidden commission can create a conflict of interest where an intermediary benefits financially from recommending one product over another. Consumers may reasonably expect advice to be impartial, particularly where the intermediary presents themselves as acting on the consumer’s behalf. Where commission is not disclosed, that expectation may be undermined.
Discovery After the Agreement Is in Place
Many consumers only become aware of possible hidden commission years later. This may occur following regulatory investigations, court decisions, or a review of documents that reveal commission arrangements. In some cases, the issue only comes to light when a consumer seeks advice or reviews historic financial agreements.
Why Timing and Evidence Matter
Whether a hidden commission claim is viable depends on the specific facts of the case. Key considerations include what was disclosed at the time, how the intermediary was presented to the consumer, and whether there is evidence showing commission was paid. These factors are assessed individually and play a central role in determining whether a claim may arise [2][3].
Types of Secret Commission Claims
Secret commission claims can arise across a range of financial products where intermediaries, brokers, or advisers receive payments that are not properly disclosed to consumers. While the underlying principles are similar, how these issues arise can differ depending on the type of product involved.
In motor finance arrangements, commission may be paid by lenders to brokers or dealers involved in arranging finance agreements. Where the existence or level of commission is not disclosed, concerns can arise about whether the terms offered to the consumer were influenced by those payments rather than by suitability or cost. This type of arrangement has been subject to regulatory scrutiny, particularly where commission structures may affect interest rates or product selection [8][9].
Loan and Broker Commission Claims
Personal loans and other credit products are often arranged through brokers or intermediaries. Loan and broker commission claims may arise where consumers were not informed that a broker received commission from the lender, particularly where the broker appeared to act independently. The central issue in these cases is whether the lack of disclosure affected the fairness of the transaction [3][10].
This type of issue is commonly seen in certain secured and unsecured loan arrangements, including claims involving lenders such as Blemain Finance and Together, where the fairness of the transaction and the lack of disclosure are central considerations.
PPI Commission Issues
Commission-related issues can also arise in connection with Payment Protection Insurance. These cases differ from traditional mis-selling complaints and focus instead on whether commission was retained within the PPI premium without adequate disclosure. Often referred to as Plevin PPI claims, these cases assess whether the level of undisclosed commission rendered the relationship between the lender and the consumer unfair, regardless of whether the PPI policy itself was suitable [4][5].
Mortgage intermediaries may receive commission from lenders for arranging mortgage products. While commission is a common feature of the mortgage market, concerns can arise where consumers were not clearly informed about how intermediaries were remunerated. Mortgage commission issues often centre on transparency and whether consumers understood the intermediary’s role and incentives [11].
Other Financial Products
Beyond loans, finance agreements, and mortgages, hidden commission claims may arise in relation to other financial products. This can include certain bank transfers–related arrangements or other regulated and quasi-regulated products. These cases are highly fact-specific and depend on the nature of the product, the intermediary’s role, and what disclosures were made at the time.
The Legal Basis for Undisclosed Commission Claims
The legal foundation for undisclosed commission claims does not rest on the existence of commission alone. Instead, it focuses on whether a commission should have been disclosed and whether failing to do so affected the fairness of the relationship between the parties.
Duties to Disclose and Conflicts of Interest
Where an intermediary acts in a position of trust or presents itself as acting on a consumer’s behalf, the law may require that material benefits are disclosed. Courts have recognised that undisclosed commission can give rise to a conflict of interest, particularly where it may influence the advice or recommendation given to the consumer [1][3].
In these situations, the concern is that consumers were unable to assess whether advice was impartial because they were not aware of the intermediary’s financial incentives.
Unfair Relationship Considerations
In some cases, hidden commission claims may also be assessed under the “unfair relationship” provisions of the Consumer Credit Act. These provisions allow courts to consider whether the overall relationship between lender and borrower was unfair, taking into account matters such as non-disclosure of commission and the circumstances in which the agreement was entered into [5].
Importantly, these assessments are fact-specific. Not every failure to disclose commission will result in a finding of unfairness, and each case depends on the evidence available and the nature of the intermediary’s role.
Regulatory Scrutiny and Secret Commission Investigations
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Alongside individual claims, regulators have examined commission practices at a market level. Secret commission investigations are typically concerned with identifying systemic risks to consumers rather than determining compensation in individual cases.
The Role of the Financial Conduct Authority
The Financial Conduct Authority (FCA) has highlighted the importance of transparency and managing conflicts of interest within regulated financial services. Through its principles and guidance, the FCA expects firms to treat customers fairly and to ensure that commission arrangements do not undermine consumer outcomes [6][7].
In certain sectors, the FCA has conducted investigations into commission structures, including in relation to motor finance. These investigations are designed to assess whether market practices comply with regulatory expectations and whether intervention is needed to protect consumers [8].
It is important to distinguish between regulatory investigations and individual claims. An investigation does not automatically mean that misconduct has occurred, nor does it guarantee that consumers are entitled to compensation. Instead, investigations provide context and may lead to changes in industry practices or further guidance, rather than retrospective findings in individual cases [8][9].
What Hidden Commissions Mean for Consumers
For consumers, the practical impact of secret commission arrangements lies in transparency and informed decision-making. Where commission is undisclosed, consumers may not fully understand the factors influencing the advice they receive.
Impact on Consumer Choice
Hidden commissions can affect how products are recommended, potentially steering consumers toward options that benefit intermediaries rather than those that best meet the consumer’s needs. Even where products function as intended, the lack of disclosure may undermine confidence in the decision-making process [2][3].
Why Claims Are Assessed Individually
Not every consumer affected by commission arrangements will have a viable claim. Hidden commission claims are assessed individually, taking into account what disclosures were made, how the intermediary was presented, and whether evidence supports the existence of undisclosed payments. Timing, documentation, and the specific legal framework all play a role in determining outcomes [2][12].
Contact Consumer Rights Solicitors
Consumer Rights Solicitors is a UK-based law firm regulated by the Solicitors Regulation Authority. Reviewing your situation with a regulated firm can help clarify whether hidden commission issues may be relevant and what options, if any, are available.
You can contact CR solicitors to discuss your circumstances and to find out whether further review may be appropriate.
FAQ
What are secret commissions?
Secret commissions are payments made by a lender or product provider to an intermediary, broker, or adviser that are not properly disclosed to the consumer. The issue is not the existence of commission itself, but the lack of transparency where consumers would reasonably expect to be informed.
What are undisclosed commission claims?
Undisclosed commission claims arise where a consumer argues that a commission payment should have been disclosed and that failing to do so affected the fairness of the transaction. These claims focus on transparency, conflicts of interest, and whether the consumer was able to make a fully informed decision.
Are secret commission claims the same as misselling?
No. Secret commission claims are distinct from mis-selling complaints. Mis-selling focuses on whether a product was suitable or properly explained. Hidden commission claims focus on whether payments to intermediaries were disclosed and whether non-disclosure influenced advice or recommendations.
What types of products can hidden commission claims apply to?
Hidden commission claims can arise in connection with various financial products, including motor finance, loans arranged through brokers, PPI commission issues, mortgage arrangements, and other financial products where intermediaries are involved. Each case depends on the specific facts and disclosures made at the time.
Does every commission arrangement lead to a claim?
No. Many commission arrangements are lawful and disclosed. A claim may only arise where commission was not disclosed and where that non-disclosure is considered material to the consumer’s decision or to the fairness of the relationship.
What is a secret commission investigation?
A secret commission investigation usually refers to regulatory or sector-wide scrutiny carried out by bodies such as the Financial Conduct Authority. These investigations examine market practices and compliance but do not automatically mean that individual consumers are entitled to compensation.
Can CRS solicitors help with secret commission claims?
CRS solicitors review matters involving secret commission claims and other undisclosed commission issues on a case-by-case basis. As a firm regulated by the Solicitors Regulation Authority, Consumer Rights Solicitors operate within the UK’s legal and regulatory framework when assessing whether commission disclosure issues may be relevant.
References
[1]https://www.lawcom.gov.uk/project/fiduciary-duties/
[2]https://www.financial-ombudsman.org.uk/businesses/complaints-deal/consumer-credit/commission
[3]https://uk.practicallaw.thomsonreuters.com/D-104-4192
[4]https://www.supremecourt.uk/cases/uksc-2014-0037.html
[5]https://www.legislation.gov.uk/ukpga/1974/39/section/140A
[6]https://www.handbook.fca.org.uk/handbook/PRIN/2/1.html
[7]https://www.fca.org.uk/firms/conflicts-interest
[8]https://www.fca.org.uk/news/press-releases/fca-investigates-motor-finance-commission
[9]https://www.fca.org.uk/publication/corporate/diagnostic-report-motor-finance.pdf
[11]https://www.handbook.fca.org.uk/handbook/MCOB/4/
[12]https://www.financial-ombudsman.org.uk/who-we-are/make-decisions
