FCA announces new commission regulations
The Financial Conduct Authority (FCA) has banned discretionary commission for car retailers and motor finance brokers.
The ban will come into force on 28 January, 2021, and is estimated to save customers £165m a year.
The FCA said that some car retailers and motor finance brokers receive commission linked to the interest rate that customers pay – creating an incentive to sell more expensive credit to some customers. Preventing the use of this type of commission would remove the financial incentive for brokers to increase the interest rate that a customer pays and give lenders more control over the prices customers pay for their motor finance.
Christopher Woolard, the FCA’s interim chief executive, said: “By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers.”
The FLA has welcomed the announcement. Adrian Dally, head of motor finance, said: “This is a welcome announcement from the FCA as it provides clarity for the industry. We are also pleased that the regulator accepted our point about the need to monitor the consumer hire market as the ban on discretionary commissions does not extend to personal contract hire agreements.”
