Anyone who has sold financial products in the pension sector prior to 2012 will remember commissions negotiated between salesforces and product providers. Most of these commissions were discretionary. Once a payment had been agreed , it was possible to upgrade the customer’s deal by rebating commission.

The FCA are now stopping car salesmen doing what they did to financial salesmen (or more properly – insurance salesmen). I was one.

We now are familiar with the car-finance product that allowed salesmen to sell financing rates that kicked back much of the finance house’s margin to the salesmen.  We have been through the various practices and the Supreme Court has made it clear where the commission was acceptable and where it wasn’t.

Even before the latest courtroom battle, lenders were already exposed to claims on discretionary commissions, which the regulator considered more problematic as they allowed dealerships to earn more if they put their customers on loans with higher interest rates.

The FCA banned such discretionary arrangements in 2021 and launched a review of them at the start of last year, after estimating they could have added £1,000 to the interest paid on a typical £10,000 car loan — costing consumers an extra £165mn a year.

“Our detailed review of the past use of motor finance has shown that many firms were not complying with the law or our disclosure rules that were in force when they sold loans to consumers,”

This is what the FCA said on Sunday. It will consult on which non-discretionary, or fixed, commissions should be included in the scheme, which will apply to all car loan agreements since 2007. The findings and final rules for recompense will be published in October.

The view is that those who get compensation- won’t be in for the compo they’d be in for , especially after the lawyers have recovered their substantial outlay advertising on TV and elsewhere.

What surprises me is that this practice is not recent but something that has been going on for nearly 20 years.

Redress will be calculated depending on the “degree of harm suffered by the consumer and the need to ensure consumers continue to be able to access affordable loans for motor vehicles,” the FCA said. It will assess the size of commissions, their disclosure, whether they were discretionary and the consumer’s characteristics to decide which were unfair.

But there is a question here which I wonder about. In the sale of insured pensions from 1984 to 2012 and the arrival of the Retail Distribution Review (RDR), when a customer bought directly from the provider, the full retail price of the product was charged, there was no reduction for cutting out the salesman.

I do not see the customer’s deal being any better by using a car or white good “finance” salesman. Was it possible to buy the car or white goods or whatever needed finance by getting a commission free deal and do the paperwork ourselves? I think this would have been possible if the banks had offered the deal.

What happened with the RDR and what later happened with the of “conditional sales” was the collapse of commission selling in pensions. Instead we now have employers enrolling people into workplace pensions without commission and virtually no sales of pension transfers.

The question is around distribution (sales) and how it is paid for. RDR happened in 2012, the rip-off practices of car salesmen went on another ten years. But the product providers are generally involved in both. We all know the name of the banks ; Lloyds Banking Group, Close Brothers, Bank of Ireland and Santander UK among them.

Insurance and car salesmen are considered the rough end of the sales journey , but in truth they are in the same position as the Libor traders who went to prison, the Post Office managers all of whom ended up in jail. They are the front end of the public limited companies who are responsible for what happens.

Where there are salesmen there is a pyramid of sales management that ensures that most of the value is usually anywhere than in the salesmen’s wallet! I know that from being on being at the bottom and top of that pyramid.

I hope that this will not be forgotten by regulators. The sale of products, the interface with end users and their training and rules are down to the organisations they act for. The post office staff especially , the Libor traders with them but even the car and insurance salesmen need a system that works for the customer and the seller.

Do we really think this is the last time this silliness will happen. When money is the retail product then there will always be a commission based threat to customers and salesmen. The FCA are right to go at the banks, the money is at the top of the pyramid.