ZOPA has welcomed the Financial Conduct Authority’s (FCA) plans to ban unfair commission charges in the car finance world.
As part of its review into the sector, the City watchdog said on Tuesday that it is planning to ban commission rates which are linked to the interest rate that customers pay. The broker can set the rate, which creates an incentive for brokers to act against consumer interests. The FCA believes that by cracking down on these practices, it can help customers to save £165m per year.
Zopa has been a vocal opponent of confusing commission rates and recently published the results of a survey which found that nine out of 10 people could not identify the cheapest car finance deal.
A separate Zopa survey found that 47 per cent of 1,000 people who had recently bought a car with finance could not identify what type of car finance deal they actually signed up for.
“We want to see a fairer and more transparent car finance market and support any measures that act in customers’ interest,” said Didier Baclin, Zopa’s chief product officer.
“At Zopa we offer secured car finance and show customers the real rate of interest that we’d lend to them at in advance of them taking out a loan. This gives customers transparency and certainty about what they are getting, putting them in complete control of how they finance their next car.”
The FCA is also proposing to change the way customers are told about the commission they are paying. This would not only apply to people selling motor finance, but to “many types” of credit brokers.
“We have seen evidence that customers are losing out due to the way in which some lenders are rewarding those who sell motor finance,” said Christopher Woolard, executive director of strategy and competition at the FCA.
“By banning this type of commission, we believe we will see increased competition in the market which will ultimately save customers money.”
The FCA will consult on the new rules until 15 January 2020 and plans to publish final rules later in 2020.
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