On 28th July, following its October 2019 consultation, the FCA confirmed it will introduce a ban on discretionary commission models

Such discretionary models operate on the basis that the retailer or broker receives commission which is linked to the interest rate that customers pay.  This therefore creates an incentive to sell more expensive credit to customers against the customers’ interests. The broker can effectively set the interest rate.

Preventing the use of this type of commission would remove the financial incentive for brokers to increase the interest rate that a customer pays and give lenders more control over the prices customers pay for their motor finance.  The FCA estimates the changes would save customers £165 million a year.

In the light of consultation feedback and the additional operational pressures which the sector is facing at present the FCA has agreed to give firms limited additional time to implement the new rules, with the ban coming into force on 28 January 2021.