The Financial Conduct Authority (FCA) has announced its intention to ban commission models where the amount received by the broker is linked to the interest rate that the customer pays and which the broker has the power to set or adjust.
The regulator expressed concern that such arrangements could create an incentive for brokers to act against customers’ interests. The arrangements in scope include:
- Increasing Difference in Charges (DiC)
- Reducing DiC
- Scaled commission models
The FCA is also concerned that consumers are not being given the right information about commissions at the right time. Consequently, it will be making minor changes to clarify aspects of its commission disclosure rules and guidance.
The FCA’s proposals are contained in a new consultation, CP19/28 Motor Finance discretionary commission models and consumer credit commission disclosure , which will run till 15 January 2020. The regulator will follow up the consultation with the publication of a Policy Statement in Q2 2020. The ban on these commission models is expected to come into force three months after the publication of the Policy statement.
“These changes have been well-signposted by the FCA, and we welcome the additional clarity and consistency they will bring to the motor finance market,” said BVRLA Chief Executive, Gerry Keaney.
“We will now work with the FCA, BVRLA members and the wider sector to embrace these proposals and the transition arrangements.”
The BVRLA is working closely with the FCA on its proposals and the implementation of them. It will also be formally responding to the consultation on behalf of the industry and members are encouraged to provide their views to Compliance and Governance Manager, Jeremy Barfour-Awuah by emailing him on Jeremy@bvrla.co.uk