Understanding commission disclosure

The regulation of motor finance commissions has been a major focus for the FCA, with significant changes affecting how lenders and brokers operate. The primary concern is ensuring that commission structures do not lead to consumer harm by incentivising higher interest rates.

To address this, the FCA has mandated the removal of discretionary commission models where brokers could set interest rates and earn higher commissions. Firms must ensure that their pricing models are transparent and that customers receive fair value in their motor finance agreements.

For lenders, these changes have created operational and financial challenges. Some firms have had to overhaul their pricing models, while others face increased compliance costs. The FCA’s focus on Consumer Duty means that firms must also demonstrate that their commission structures align with fair value principles and do not unfairly disadvantage consumers.

Ensuring compliance with these regulatory changes requires careful planning and a strong governance framework. Lenders and brokers must work together to ensure that transparency and fairness are at the core of their commission structures.

CCTA supports its members in navigating these regulatory shifts, guiding them in compliance, industry best practices, and advocacy efforts to ensure a fair and sustainable motor finance market. With heightened scrutiny on motor finance commissions, lenders must ensure compliance while maintaining sustainable business practices. Learn more about regulatory expectations, best practices, and industry insights by exploring our motor finance resources or joining our industry roundtables.