THE Financial Conduct Authority (FCA) has presented its views on commission models.

The views were made at the recent BVRLA Leasing Broker Committee meeting on November 05, 2019 at the BVRLA’s Amersham HQ.

The FCA, which is currently consulting on the banning of commission models that offer motor finance brokers and dealers an incentive to raise customers’ interest rates, provided clarification to the Leasing Broker Committee on some of the issues raised.

Brokers can read an overview of the FCA’s position and what it means to leasing brokers on the BVRLA website.

But the key issues for leasing brokers are these:

  • The FCA is clear that its review only relates to commission paid on consumer credit products, for example hire purchase and personal contract purchase. It does not apply to personal contract hire.
  • The commission made by a car finance broker cannot be linked to the commission earned, although the FCA recognises that commissions can be made – but not at the expense of poor customer outcomes.
  • The FCA said that the customer must be told in advance that commissions exist so customers can make informed decisions.

Alan Carreras chairman bvrla leasing broker committeeAlan Carreras, chairman of the BVRLA Leasing Broker Committee (pictured left), commented: The FCA’s CP is broadly welcomed by the Leasing Broker community. However, caution needs to be taken that the products at the centre of the consultation are not ‘demonised’ in the manner diesel powered vehicles have been. PCP and other forms of finance purchase products are still valuable and viable options when disclosed fully to clients.”

Toby Poston, director of communications and external relations, at the BVRLA added:

“The BVRLA will continue to work closely with the FCA on its proposals and the implementation of them. It will also be formally responding to consultation on behalf of the industry and would appreciate members’ feedback on the consultation questions in order to inform the BVRLA’s response.” 

Background to the FCA review

The FCA is consulting on two proposals:

  • To ban commission models that give motor finance brokers/dealers an incentive to raise customers’ interest rates
  • To amend rules regarding the disclosure of commission to make it clearer when the existence of commission needs to be communicated

The consultation is open until January 15, 2020. The BVRLA said it would be collating member’s views to form a response.

See our related stories on the FCA

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