CP19/28: Motor finance discretionary commission models and consumer credit commission disclosure

Open consultation: CP19/28
15/10/2019
15/10/2019
Consultation closes
15/01/2020
Policy Statement
Q2 2020

We are consulting on plans to ban commission models that give motor finance brokers/dealers an incentive to raise customers’ interest rates. We are also consulting on minor changes to some of our rules and guidance to ensure that many types of credit broker give consumers more relevant information about commission.

Read CP19/28

Why we are consulting now

Our extensive research into this sector has found that discretionary commission models have led to higher finance costs for consumers. Firms are also often failing to give customers timely, relevant information.

This paper consults on proposals to:

  • ban commission models that can give brokers and motor dealers an incentive to increase a customer’s interest rate
  • amend parts of our rules and guidance relating to the disclosure of commission arrangements with lenders

 Who this applies to

  • motor finance providers
  • motor finance credit brokers, including motor dealers
  • Chapter 4 is directly relevant to many types of brokers of regulated credit and consumer hire agreements
  • this consultation will also be of interest to trade bodies representing consumer credit lenders, consumers and consumer organisations

Background to our work on motor finance

In our 2017/18 Business Plan, we announced a review of the sector. In March 2018, we published an update report setting our initial findings. We published the review’s final findings, in March 2019.

We found:

  • Widespread use of commission models that link brokers’ commission to the interest rate charged to the customer, leading to conflicts of interest.
  • We also found a high incidence of firms not complying with some of our existing rules and guidance on the information they should disclose to customers.

What you need to do

Please send your comments to us by 15 January 2020.

Online response form

You can also:

  • email your responses to [email protected] or 
  • write to: Policy Consumer Credit, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

Next steps

We will consider your feedback and plan to publish a Policy Statement (PS), including any final rules, at the beginning of Q2 2020.