Britain’s financial watchdog is cracking down on the way car dealers and car finance brokers make commission on sales, a move that it claims will save drivers £165 million (US$210.8 million).
The Financial Conduct Authority (FCA) announced it would ban the way some car retailers and brokers received commissions linked to the interest rate customers paid on the loan they took out to buy a car. The arrangement means the higher the interest rate, the more commission is payable.
The seller can set the rate and the FCA found that “the widespread use of this type of commission creates an incentive for brokers to act against customers’ interests.”
Banning this kind of commission would remove the financial incentive for brokers to increase the interest rate paid by customers, and give lenders more control over the prices customers pay for their motor finance, the watchdog stated.
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