UK bans interest rate-linked car financing

(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 ($212 million) 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.