The FCA has published Policy Statement 14/18: Credit broking and fees (PS14/18).
In PS14/18 the FCA introduces new rules concerning credit broking activities that will enter into force on 2 January 2015. The FCA is doing so without prior consultation, in reliance on section 138L of the Financial Services and Markets Act 2000, on the grounds that the delay involved in consulting would be prejudicial to the interests of consumers.
The FCA notes that there have been concerns for some time over the charging of upfront fees by credit brokers. However, recently there has been an acceleration of complaints and other evidence of consumer detriment which has led to the FCA taking action. Some 41 per cent of all complaints received since 1 April by the FCA’s Consumer Credit department relate to credit broking, and around 80 per cent of these are about online brokers charging upfront fees.
- the rules will ban credit brokers from charging fees to customers, and from requesting customers’ payment details for that purpose unless they meet FCA requirements;
- these requirements include that credit brokers must make sure 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;
- fee-charging brokers will need to notify the FCA on a quarterly basis of the websites they operate;
- 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 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; and
- there are additional rules on cancellation rights for distance contracts (for example, online credit broking), including rights to a refund.
The FCA is planning a consultation in January 2015 on various consumer credit matters and will take that opportunity to consult on whether to retain or modify the new rules, and whether to introduce additional rules.
View Policy Statement 14/18: Credit broking and fees, 1 December 2014.