On 20 January 2025, the House of Lords Financial Services Regulation Committee published a letter dated 17 January 2025 that it received from Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), regarding motor finance commission.

In the letter, Mr Rathi explains that the FCA’s rules on commission disclosure for credit brokers (set out in the Consumer Credit sourcebook) set a regulatory framework of general requirements that apply to credit brokers both within and beyond the motor finance sector where they are carrying on regulated activity. They sit alongside additional duties that may arise separately under the common law or equity, depending on the individual facts of specific cases.

The letter goes on to respond to questions asked by the Committee in a letter dated 20 December 2024, relating to:

  • The relevant FCA Rules and Principles concerning both discretionary and fixed commissions, both prior to and following relevant amendments in 2021.
  • Whether the FCA took legal advice in connection with both its decision to ban discretionary commission arrangements (which it did in 2021) and the Rules and Principles referred to in the first question. If it did, the Committee also asked when and from whom each piece of advice was sought and requested full evidence of any such advice.