Dealer Commissions Information

FCA Ban Certain Motor Finance Commissions

On the 15th October the Financial Conduct Authority (FCA) published proposals to outlaw Motor Dealers and Brokers from receiving commission payments that are linked to the interest rate that customers pay on their car finance.  These models cause consumer harm and make buying a car on finance more expensive for customers than it should be. 

First Response Finance Limited has never used this type of Commission. 

Our purpose has always been to provide great credit solutions for our non-prime customers and do this by making sure our products are as competitively and clearly priced as they can be.   As such our relationship with supporting Motor Dealers and Brokers is based on the quality of our service as we help them find suitable finance packages for customers who need a new car, but that other firms have turned away. 

We agree with the FCA’s actions and welcome any proposals which are aimed at reducing consumer harm and creating a more even playing field for Customers, Motor Dealers and Finance Companies. 

More information regarding the FCA’s proposals can be found by clicking this helpful link.

Key messages from the FCA's proposals are:

“We want to eliminate the harm caused by discretionary commission models. We have found a significant difference in the amount of interest customers pay when taking a motor finance deal arranged through a broker who benefits from a discretionary commission model compared to a flat fee model.”

“Breaking the link between interest rate and commissions should remove the incentive for brokers to set a higher interest rate and so should decrease financing costs for consumers.”

“Our proposed rules would also continue to allow firms to operate models where the amount of commission is determined by the amount of work carried out by the broker. In principle, there may be a rationale for higher commissions where the broker undertakes more work on the lender’s behalf to gather information and make an initial assessment. For example, in the case of customers who are a higher credit risk, a more detailed assessment of affordability may be necessary...”

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