Car financing is set to face a crackdown saving drivers £165m, the UK’s financial regulator has announced.
The Financial Conduct Authority wants part of the crackdown to involve banning the way some car dealers and brokers make commission on sales.
It claimed that some dealers make commission on the loan’s interest rate, which they set, and that this “creates an incentive for brokers to act against customers’ interest.”
Christopher Woolard, executive director if strategy and competition at the FCA, said: “We have seen evidence that customers are losing out due to the way some lenders are rewarding those who sell motor finance.”
Some brokers and car retailers make a commission on the interest rate they charge customers that take out a loan to buy a car – higher interest rates make for a higher commission.
Woolard added: “By banning this type of commission, we believe we will see increased competition in the market which will inevitably save customers money.”
In addition, The FCA uncovered that only a small amount of brokers it examined notified customers that they might receive commission for arranging a loan.
Proposals will now be consulted by the FCA until the 15th of January 2020. Plans to publish final rules are said to happen later on that year.