Financial Conduct Authority clamps down on motor financing commissions
The UK’s financial regulator is set to crackdown on motor financing commissions in an attempt to save drivers £165m a year.
The Financial Conduct Authority (FCA) announced today it would ban how some auto dealers and brokers structure their sales commissions.
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The FCA said some dealers make commissions on interest rates they set which, “creates an incentive for brokers to act against customers’ interests”.
This costs customers £165m a year, according to the FCA.
The new regulation aims to remove the financial incentive for brokers to hike up interest rates and instead give lenders more control over the prices that customers pay for motor finance.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said it was clear that some customers were losing out.
“By banning this type of commission, we believe we will see increased competition in the market which will ultimately save customers money,” he said.
Adrian Dally, head of motor finance at the Finance and Leasing Association, said: “Today’s announcement is good news for the industry and consumers, as it delivers clear rules and a consistent approach to commissions.
“Many lenders have already moved to the commission models that the FCA is proposing.”
The FCA is also proposing to increase credit broker transparency by ensuring customers are more aware of the details surrounding the commissions they are paying.
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This would extend beyond motor financing and include many different types of credit brokers.
The FCA is consulting on the new rules until January and will publish final rules later in 2020.