The FCA has toughened up regulations governing credit brokers amid concerns poor practice in the market could lead to “serious” consumer detriment.
The new regime, which comes into force on 2 January, will ban credit brokers from charging fees to customers, or requesting payment details for that purpose, unless they comply with transparency requirements.
These include giving customers clear information about who they are dealing with, how much they will be charged, and when and how the fee will be payable.
The regulator has announced the new rules without consultation because it fears the time it would take to consult would be “prejudicial to the interests of consumers”.
FCA chief executive Martin Wheatley 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.”
The regulator says it has stopped seven firms from taking on new business,while three further cases have been referred to enforcement.
According to the FCA, over 40 per cent of consumer credit complaints received relate to brokers, some 80 per cent of which involve firms charging upfront fees.