THE Financial Conduct Authority (FCA) says it will ban the way some car finance brokers and car retailers sell motor finance.
It is concentrating on the way brokers can set the finance rate and the resultant commission.
The FCA says this is not in the best interests of consumers and will save car buyers of PCP products £165m a year.
The move gives motor finance lenders the control over what consumers pay for car finance.
In March 2019, the FCA announced it was investigating excessive motor finance costs. It will consult on the new rules until January 15, 2020, before publishing its final rules later in the year.
Adrian Dally, head of motor finance at the Finance & Leasing Association, said:
“Today’s announcement is good news for the industry and consumers, as it delivers clear rules and a consistent approach to commissions. Many lenders have already moved to the commission models that the FCA is proposing.”
BVRLA chief executive, Gerry Keaney, added: “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.
“We will now work with the FCA, BVRLA members and the wider sector to embrace these proposals and the transition arrangements.”
Editor’s comment on the FCA car finance broker ruling
While the FCA ruling is for car finance brokers, many leasing brokers will be caught in the bow wave of public opinion who fail to recognise the differences between motor finance products and car leasing products.
A renewed focus on treating the customer fairly – and communicating that to customers strongly – will be a necessary response over the coming weeks and months from leasing brokers.
Ralph Morton, editor
Ralph Morton is the leading journalist in the leasing broker sector and editor of Broker News, the website which provides information and news for BVRLA-registered leasing brokers. He also writes extensively on the fleet and leasing market in both the UK and Europe.
