ASIC has moved to formally ban flex commissions paid by lenders to finance brokers, typically car dealers, for loans where the broker can set the interest rate. ASIC said this had led to consumers paying excessive interest rates on car loans. Flex commissions are paid by lenders to car finance brokers - typically car dealers - allowing the dealers to set the interest rate on the car loan. The higher the interest rate, the larger the commission the dealer gets.The lender and the dealer share the flex amount. The percentage of the flex amount kept by the dealer varies significantly and can be up to 80 per cent of the interest charges.There are no criteria used to set the interest rate - a situation which ASIC said "has been shown to result in opportunistic pricing arrangements." <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:1; mso-generic-font-family:roman; mso-font-format:other; mso-font-pitch:variable; mso-font-signature:0 0 0 0 0 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:auto; mso-font-pitch:variable; mso-font-signature:-536870145 1073786111 1 0 415 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin:0cm; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Times New Roman"; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-ansi-language:EN-AU; mso-fareast-language:EN-US;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-ansi-language:EN-AU; mso-fareast-language:EN-US;} @page WordSection1 {size:612.0pt 792.0pt; margin:72.0pt 72.0pt 72.0pt 72.0pt; mso-header-margin:36.0pt; mso-footer-margin:36.0pt; mso-paper-source:0;} div.WordSection1 {page:WordSection1;} --Following public consultation on the commissions, ASIC has announced a formal ban, saying it has found that they lead to consumers paying excessive interest rates on their car loans. The ASIC Credit (Flexible Credit Cost Arrangements) Instrument 2017/780 inserts new provisions into the National Consumer Credit Protection Act 2009.Lenders and car dealers have until November 2018 to bring in new commission arrangements. The changes mean that the lender, not car dealers, must have responsibility for determining the interest rate that applies to a particular loan. Car dealers will have a limited capacity to discount - or increase - the interest rate but this will be within a specified range, between a "base rate" and "maximum rate" agreed between the dealer and lender ahead of time.This means all customers of a car dealer will be charged interest within a set range, limiting the ability of dealers to charge different customers different rates - and potentially taking advantage of financially inexperienced customers. Lenders must keep a record of the basis for determining those fees for at least seven years. In addition, if there is a flexible cost arrangement, lenders must not pay introducers a fee which exceeds the origination or administration fees agreed prior to the introduction of the customer, said solicitors at Dentons law firm in a note to clients.The prohibition does not apply to home loans, defined in the Instrument as loans 100 per cent used to purchase residential property; or to refinance loans wholly or predominantly made to purchase residential property."As a result all other regulated loans will be subject to the restriction.  For example, the prohibition would