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PCH missing from commission disclosure ban plans, says FLA

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The Financial Conduct Authority (FCA) is likely to introduce a ban on retailers’ discretionary finance commission model this year, but personal contract hire (PCH) deals are not currently included in the move.

The Finance and Leasing Association (FLA) is supportive of the ban, but raised key concerns in response to consultation for the plans that ended today (January 15).

The FCA’s review of the industry in October last year had called for an outright ban on the use of Increasing Difference in Charges (DiC), Reducing DiC and Scaled commission models in a bid to end a situation which can see car dealers offering higher finance interest rates rewarded with higher commission.                              

The FCA said in a statement issued on October 15, 2019 that a finance broker’s ability to set that rate “creates an incentive for brokers to act against customers’ interests”.  

Adrian Dally, Finance and Leasing Association (FLA) head of motor finance, said: “The critical path the FCA is to implement a ban this year.

“We’re expecting a response to the consultation and further details in March or April.”

Implementation could be in the summer, or at the very latest by the end of 2020.

While Dally said the FLA is supportive of the move to ban DiC, it said its response to the consultation raises two key issues.

The first is the need for a six month window, rather than three months to allow dealers, brokers and finance providers to implement any changes to people, systems and processes in order to facilitate the ban.

The second is that personal contract hire (PCH) does not currently fall under the scope of the ban.

Dally said: “We really think PCH should be included in the ban and have suggested this to the FCA as part of our feedback.

“It should be a level playing field with all motor finance products covered. The whole point of the consultation is that the government can act on this feedback, so we’re confident changes can be made ahead of implementation.”

A spokesman for the FCA told AM it was too early to give feedback on issues like PCH and implementation deadlines, as well as any other points raised in the consultation, but said it would be sharing further details in the spring.

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