In the impact assessment, it proposes to establish principles-based standards for remuneration because, it said, borrowers are less likely to be sold a product skewed to favour the provider. over the consumer.
Financial services staff and consumers frequently complain about the sales driven nature of advice, where high sales targets increase the pressure to sell, regardless of client interest.
The lower rates of default and foreclosure could feed up to £462m back to EU consumers and society as a whole, according to the EC Directive cost-benefit analysis.
Lenders and brokers could face £2.6m in mainly one-off costs covering changes to the operation of staff payment schemes. However, lenders and brokers would also be impacted by loss of a substantial tool for staff benefits, it said.
Employees may also earn less as a result of the change, “because they can no longer increase revenue just by selling higher commission products.”
“Employers may simply abolish commission based sales and compensate by
raising employees base salary. In that case, no important negative impact on firms’ profitability should be expected since this policy will just imply a reallocation of expenses on staff,” it said.
Lenders would also be less likely to offer higher fees for specific products, like sub-prime for instance, when selling through intermediaries offering more transparency to consumers.
Any cost to lenders is far outweighed by the benefit to consumers, it said.
