Industry-leading finance brokerage company, 1800Approved, has announced it is 100% supportive to the corporate watchdog moving to ban "unfair" commissions which allow car dealers to boost commissions by signing customers up to higher-interest loans. The Australian Securities and Investments Commission (ASIC) has prohibited the commissions, which allow car dealers to charge a higher interest rates on car loans.

ASIC recently announced flex commissions - which allow dealers to charge higher interest rates on car finance and share the profit with the lender - do not operate in a "fair and transparent way” and ultimately allows for discrimination on unaware buyers.

1800Approved Managing Director, Rodney Michail has thrown his considerable support fully behind the planned ban on customer’s being overcharged on interest rates; “At 1800Approved, we are all about customer support, service, and providing our customers with the best possible loan deals, personalised to their needs from a panel of more than 40 lenders.”

Mr Michail went on to add; “The ASIC ruling to cap commissions is totally consistent with our company ethos, the promise we give to all our customers: We will find you the loan that best suits your needs – we work for you, not the bank”. Mr Michail added; “I agree with ASIC in that the people being charged higher rates are potentially the most financially vulnerable. It is our job to spend the time and negotiate a better loan for these people who may not have the time or compulsion to negotiate.”  Under the proposed legislation, a dealer's commission would no longer be linked to the interest on a loan and should assist the most vulnerable people but with a limited lending panel we are uncertain if the clients will be offered the best product to suit there needs.

ASIC believes the ruling will reduce interest rates. ASIC chairman Peter Kell’s agrees; "We are confident this prohibition will benefit consumers by removing incentives that increase the interest rates they are charged. We consider that average interest rates on car loans will fall as a result of more efficient pricing models and lower losses through defaults. We expect lenders will work with car dealers in moving to fairer and more sustainable models”, Mr Kell said.

ASIC said it still wanted dealers to have the ability to offer lower interest rates if it helped them secure sales.

ASIC plans to release the final legislation in April after consulting with the industry, with the proposed ban slated to begin on September 1 2018.