FCA is likely to propose changes to how commission works in the motor finance sector. It has carried out a review and has found that commonly used models allow brokers discretion to set the interest rate customers pay. This means the broker can potentially earn a higher commission and this can lead to conflicts which lenders do not properly control with the overall consequence that customers may more than they should for their motor finance.
FCA may now consider banning certain types of commission or limiting broker discretion.
FCA’s review also found that some firms are not complying with their obligations in terms of pre-contract disclosures, explanations and affordability assessments.
FCA will be following up with individual firms, but expects all lenders and brokers in the market to review their policies, procedures and controls.