The Financial Conduct Authority (FCA) has found that car dealers are overcharging consumers buying cars on credit by more than £1,000, on interest payments resulting in higher commission.
The FCA are considering ways to combat the way in which commission works, after they uncovered “serious concerns” over the way lenders chose to reward their car retailers, along with other credit brokers.
The FCA said this is leading to customers paying more for finance and cost’s car buyers over £1,000 a year, or collectively £300m.
Jonathan Davidson, the regulator’s executive director of supervision, said: “We found that some motor dealers are overcharging unsuspecting customers over a thousand pounds in interest charges in order to obtain bigger commission payouts for themselves.
“We estimate this could be costing consumers £300m annually. This is unacceptable and we will act to address harm caused by thisbusiness model.
“We also have concerns that firms may be failing to meet their existing obligations in relation to pre-contract disclosure and explanations, and affordability assessments.
“This is simply not good enough and we expect firms to review their operations to address our concerns.”