FCA bans commission charges

The Financial Conduct Authority (FCA) has now implemented a ban on all car finance commission deals which allowed sales teams to earn higher rates of commission from setting their own high interest rates. 

Prior to this regulation, dealerships across the country were paid based on the interest rates drivers sign up to for PCP deals resulting in higher commission for brokers, and customers losing out, signing up to poor deals – unaware of activities taking place behind the scenes.

The FCA revealed as an example, for a vehicle costing £10,000 over a four-year period, a customer pays £1,100 more in interest when signed to a Reducing Differences in Charges model.

What does this mean? 

Using the example outlined above, the Reducing Difference in Charges model for increasing commission leads to £275 extra in interest per year. 

What do the experts say? 

Interim Chief Executive at the FCA, Christopher Woolard said: “By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers.

“We estimate that consumers could save £165 million because of today’s action.”

It’s certainly a huge step forward for the motor finance industry and one which will help thousands of consumers affected by this malpractice get the compensation they deserve. 

Source: https://www.mirror.co.uk/money/huge-car-finance-change-comes-23400986