An article in Automotive Management’s AM Online magazine highlighted new research from premium finance firm Close Brothers Motor Finance which showed worryingly low levels of awareness of the new FCA rules on commission models among motor retailers.
Close Brothers’ survey found that 69% of motor retailers have heard of the new rules, of whom just 33% have actually read the FCA paper explaining the rules. Meanwhile 32% are unaware of the ban on all discretionary commission (DiC) models in motor finance that comes into effect on 28 January.
Published in October 2019, PS20/8 sets out the FCA’s approach to keeping the industry fair and safe and improving outcomes for customers. Pricing models linked to commission will no longer be allowed after 28 January.
The FCA has not specified what commission models the industry should use, leaving this to lenders’ discretion. The regulator has, however, suggested moving to risk-based pricing, provided the broker is not incentivised to set or adjust the rate charged. New models could also include banded-fixed rate models, while commission could vary by product or by lender.
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