THE FCA will ban discretionary commission effective 28 January, 2021.
The ban follows a consultation period that began in October 2019.
The FCA says consumers are disadvantaged by higher costs from discretionary commission models charged by motor finance brokers and dealers. And that it acts against the interests of the customer.
Christopher Woolard, the FCA’s interim chief executive, said:
By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers.
Woolard added that the FCA believed consumers could save £165m because of the action taken and that it will also make changes to the way in which customers are told about the commission they are paying to ensure that they receive more relevant information.
Sue Robinson, director of the National Franchised Dealers Association (NFDA), commented:
“It is positive that the FCA has agreed to a six-month implementation period for the ban on discretionary commission modes, rather than the originally proposed three-month period.
“Franchised dealers are committed to providing clarity to their customers and NFDA supports appropriate measures that are of benefit to consumers.”
You can find the FCA’s policy statement here: Motor finance discretionary commission models and consumer credit commission disclosure.