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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