UK watchdog to ban interest rate-linked car finance commission

FILE PHOTO: Toyota cars at a dealership in West London are pictured as it remains closed during lockdown following the outbreak of the coronavirus disease (COVID-19), London, Britain, May 5, 2020. REUTERS/Toby Melville

LONDON (Reuters) - A ban from next January on car retailers receiving commission linked to the level of interest rates on loans will save customers 165 million pounds a year, Britain’s Financial Conduct Authority said on Tuesday.

The FCA said this type of commission creates an incentive to sell more expensive credit to some customers, and that it would bring in the ban from Jan. 28, 2021, following its public consultation last October.

“By banning this type of commission, where brokers are rewarded for charging consumers higher rates, we will increase competition and protect consumers,” said Christopher Woolard, the FCA’s interim chief executive.

The watchdog said that, from next January, there would be changes in the way customers are told about the commission they are paying to ensure they receive more relevant information.

Reporting by Huw Jones; Editing by Alex Richardson