UK auto lenders: Brace for £13bn bill after FCA delves into commissions

TLDR:

• UK auto lenders may face a £13 billion bill following an investigation by the Financial Conduct Authority (FCA) into commissions.
• The FCA found that lenders received high commissions for arranging car loans, resulting in excessive interest rates for consumers.

UK auto lenders could face a bill of up to £13 billion ($17 billion) following an investigation by the Financial Conduct Authority (FCA) into commissions. The FCA found that lenders received high commissions for arranging car loans, which resulted in excessive interest rates for consumers. The investigation focused on whether the manufacturers and dealers who set up car finance deals were acting in the best interest of customers. The FCA found that as a result of the commission arrangements, lenders were able to charge higher interest rates, which in turn led to higher loan repayments for consumers. The FCA estimates that this could have affected up to 20% of customers taking out car finance, resulting in a potential bill of £13 billion. The FCA has proposed a series of measures to address consumer harm, including banning certain types of commission models from January 2022 and requiring lenders to disclose the commission they receive.