Vauxhall dealership
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The ban will primarily affect automotive brokers, but will apply to other industries too.

FCA plans to "increase competition and protect consumers" with discretionary commission ban

A UK authority has today announced that it is introducing new rules on the types of commission that car retailers can use.

The Financial Conduct Authority (FCA) has confirmed it will introduce a ban on discretionary commission models, which it estimates will save customers £165m per year.

Currently, some car dealers and motor finance brokers receive commission which is linked to the interest rate that customers pay, creating an incentive to sell more expensive credit to some customers.

The dealer can effectively set the interest rate, and the FCA found that the use of this type of commission creates an “incentive for brokers to act against customers’ interests”.

The FCA said that the changes, which come into force on 28 January 2021, would give lenders more control over the prices customers pay for their motor finance.

Christopher Woolard, the FCA’s interim chief executive, commented: “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 £165m because of today’s action.”

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