FCA introduces new credit broking rules

The Financial Conduct Authority (FCA) has announced new rules to help protect customers from fee-charging credit brokers.

From the start of next year, credit brokers will not be able to charge fee details unless they comply with the regulations. The new rules mean that all credit brokers must ensure they provide customers with clear information on why the fee is payable and who it will be paid to.

Martin Wheatley, chief executive of the FCA, said: “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.”

The FCA conducted an investigation into the sector after a number of concerns were raised by consumers. In particular, there was a lack of transparency in the market, with many people not realising they were dealing with a broker rather than directly with the lender.

Customers also felt that fees had been taken without them being made fully aware of the final amounts or why they had been required to provide payment details.

The investigation also revealed that consumers had struggled to be able to receive a refund or have their complaints resolved to their satisfaction.

Under the new rules brokers must provide their legal name in all communications and advertising material, as well as ensuring they make it clear that they are brokers and not lenders.

People will also be able to have a 14-day right of cancellation where credit broking contracts are entered into as distance contracts.

At present, around 40 per cent of complaints made to the FCA related to the consumer credit industry are connected with credit brokers.