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New rules have been introduced by the Financial Conduct Authority (FCA) in the credit broking market. The rules come into force on 2 January 2015. These 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. The new rules have been made without prior consultation because the FCA considers that the delay arising from the time it would take to consult would be prejudicial to the interests of consumers.
Here is a summary of these rules:
The FCA’s concerns relate to:
- a lack of transparency, resulting in consumers often not realising they are dealing with a broker rather than a lender;
- fees being taken without informed consent, for example where terms and conditions are hidden or misleading;
- consumers being misled as to the purpose of giving their payment details;
- firms passing on consumers’ details, including their payment details, without informed consent, to other firms who also take a fee; and
- consumers facing difficulty in identifying the firm that has taken a fee, and in obtaining a refund from the firm or a response to their complaint.
The announcement is part of a package of measures which will also require credit brokers to:
- include their legal name, not just their trading name, in all advertising and other communications with customers;
- state prominently in all advertising that they are a credit broker and not a lender; and
- report quarterly to the FCA listing their website domain names, if they charge fees to customers.
Consumers will also have a 14-day right of cancellation where credit broking contracts are entered into as distance contracts, for example online.
For full details of the new rules please follow this link http://www.fca.org.uk/your-fca/documents/policy-statements/ps14-18.
Does this mean the end of Fee Charging Brokers?
In our opinion it is as anyone wanting to operate a legitimate fee charging scheme will have to have the full informed consent of the customer and cannot take debit card details without it. We also think this change will benefit our industry in the long run.