New rules tackle unfair credit broker practices

From this month, new rules will ban credit brokers in the UK from charging fees to customers, and from requesting customers’ payment details for that purpose, unless they comply with new requirements ensuring that customers are given clear information about who they are dealing with and what fee will be payable.

The new rules have been made without prior consultation because the Financial Conduct Authority (FCA) believes that the delay arising from the time it would take to consult would be prejudicial to the interests of consumers.

The FCA also believes that enforcement action alone is not sufficient to protect consumers from the poor practices identified in the market.

Martin Wheatley, chief executive of the FCA, commented: “The fact that we have had to take these measures does not paint this market in a particularly good light. I hope that other firms will take note that where we see evidence of customers being treated in a blatantly unfair way, we will move quickly to protect consumers from further harm.”

Over 40% of consumer credit complaints received by the FCA relate to credit brokers, 80% of which relate to firms who charge upfront fees. The FCA says it has also received relevant intelligence from consumer groups who are seeing increasing complaints from people who have had money taken from their accounts unexpectedly and often by more than one broker.

The FCA is currently investigating a number of credit broking firms; seven firms have been stopped from taking on new business and, to date, three further cases have been referred for enforcement action.

A key concern for the FCA is the fact that many consumers often do not realise that they are dealing with a broker rather than a lender.