The FCA estimates consumers are being conned out of £300m every year by the practice. But it is not just motorists that are paying over the odds, with commercial property owners also paying millions every year in hidden commission payments.

Consumers are paying an average of £1,100 in hidden commission fees in interest payments when buying a car on finance, regulators have found.

Such arrangements are now used to finance as many as nine out of 10 cars bought in the UK, but a survey by the Financial Conduct Authority found sales practices that are poorly controlled by lenders and that give rise to conflicts of interest.

The survey found that car salesmen are failing to tell consumers that their commission is built into the interest rates charged as part of the finance arrangement and that consumers are left in a poor position for negotiating the best deal for their new car.

Jonathan Davidson, executive director of supervision, retail and authorisation at the FCA, told The Telegraph: “We found that some motor dealers are overcharging unsuspecting customers in interest charges in order to obtain bigger commission payouts for themselves.

“We estimate this could be costing consumers £300 million annually. This is unacceptable and we will act to address the harm caused by this business model. We also have concerns that firms may be failing to meet their existing obligations in relation to pre-contract disclosure and explanations, and affordability assessments.”

“This is simply not good enough and we expect firms to review their operations to address our concerns,” he added.

But it is not just the motor market that is cursed with unscrupulous agents charging hidden commission payments, with the commercial property market also plagued by the issue.

“In our experience, the prevalence of secret commissions is widespread within the commercial property sector,” says M2 Recovery founder Neil Holloway. “Unfortunately, we also know there is widespread reluctance to change due to the fact that these secret commission payments are often financially supporting a business or subsidise other less profitable activities within that business.”

But how does it work? Managing agents are often responsible for arranging insurance for the properties they are in charge of, representing leaseholders and tenants in negotiations with insurance brokers. But many managing agents are using this as an opportunity to line their pockets by asking for hefty commissions in return for placing business with a particular broker.

Known as secret commissions, these payments can add thousands of pounds to the price of an insurance policy, and all without the leaseholder’s knowledge.

“Many leaseholders are unaware that their premiums are being artificially inflated so that managing agents and freeholders can secure the biggest commission payment they can find in the market without regard for the overall price of the policy, nor the level of cover available,” Holloway says. “These secret commissions only serve to line the pockets of middlemen and hamper fair competition among insurers.

“This, however, must change and it is to that end that M2 Recovery is working.”

Think you have been a victim of secret commissions?

Get in touch with M2 Recovery now for a free evaluation