The sale of car finance is set to undergo a crackdown after the UK's financial regulator revealed that it had uncovered unfair practices among some retailers and brokers in the way they make commission on sales.
In a report issued today, the Financial Conduct Authority (FCA) revealed that some sellers earned staged commission according to the interest rate at which they sold a car, with greater bonuses on offer for charging customers more.
"We have seen evidence that customers are losing out due to the way in which some lenders are rewarding those who sell motor finance," said Christopher Woolard, executive director of strategy and competition at the FCA.
"By banning this type of commission, we believe we will see increased competition in the market which will ultimately save customers money."
The FCA is now proposing to enforce a fixed commission fee, rather than tethering it to the interest rate at which it is sold. It says the move could save drivers around £165m a year.
In addition, the FCA is looking to ensure that all loan commission - including from outside of the car industry - is more transparently described to customers, in order to give buyers more information.
The FCA will consult on the proposed new rules until 15 January 2020 before implementing them at some point during the year.
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Another first?
Ironic that the article refers to unfairness when some companies pay Autocar for advertising space whilst others can seemingly advertise for free in user comments.
How long before Bulgaria fans use this comments section to peddle their disgusting racial abuse? Can't believe any responsible company turning a blind eye to blatant exploitation.
Really, the FCA have only just noticed?
This has been standard practice pretty much forever. The dealership has a base rate and the finance manager is tasked specifically with charging more than this to earn for the dealership and himself. Leasing in particular can be the one where huge commissions can be made, as the customer just agrees to the monthly payment and never relates it to the real cost.
I wonder why the FCA have decided now is the time? Did one off their staff get overcharged?
booshubby wrote:
No, they haven't just noticed. Firstly the FCA only became responsible for this area of lending in 2013. They have been studying this for some years and actually issued their final report back in March. The reason it has come back today is that they are now consulting on their proposals to ban the model of lending, as mentioned in the Autocar piece.