FCA's credit broking rules come into force

The rules will ban credit brokers 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, what fee will be payable, and when and how the fee will be payable.

Additionally, all brokers will need to include their legal name (as it appears in the FCA Register) in all advertising and all correspondence with customers.

Advertising must also clearly state that the firm is a credit broker and not a lender; if the firm is both a credit broker and a lender, the advertising will need to make clear that they are advertising their broking services, not their lending.

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 has also received relevant intelligence from consumer groups and others 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 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.

Martin Wheatley, chief executive of the Financial Conduct Authority, says:

“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.”

Mike O’Connor, Chief Executive of StepChange Debt Charity, said:

“This will help fix a serious problem with the consumer credit market. For too long unscrupulous credit brokers have subjected borrowers to poor practices, including misleading people as to whether they are a lender or a broker, taking fees that a people are unaware of, and passing on individuals’ details to other firms and lenders.

“Ensuring greater transparency for consumers will address detriment in this market.  However, we remain concerned that brokers will still retain the ability to take upfront fees without ever delivering a loan, and we would urge the FCA to ban this practice.”