The Consumer Council said in Jersey as with the UK, some arrangements allowed dealers to increase the interest rate offered to a customer in order to earn a higher commission, a practice that had since attracted regulatory and legal scrutiny.
It said the key issue was “transparency”.
“Borrowers should have been clearly told whether commission was being paid, how it was calculated, and whether it could affect the cost of their borrowing.”
The council said the letters were designed to be straightforward, and request written confirmation of whether discretionary or flat commission arrangements applied, or whether there were exclusive relationships between dealers and finance companies.
It added if commission arrangements did apply and were not disclosed, the letters allow customers to raise a formal complaint.
If firms were unable to confirm the position, the correspondence could also operate as a data subject access request, requiring companies to provide relevant records under Jersey’s data protection law.
It said once people received either a rejection letter, or no reply within three months, they could raise the issue with the Channel Islands Financial Ombudsman.