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FCA toughens credit broker rules amid consumer detriment concerns

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.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Any complaint about the broker community is not useful -but according to your report less than 50% of complaints are about brokers. Yes we do need to be clear and concise about how and when we charge and we need to make the customer understand that we can spend a lot of time trying to secure a competitive mortgage deal.
    What would be useful info is to give us an idea of the number of complaints against the volume of cases/transactions done, surely this would give us a better insight to the scale of the problem.
    On the face of it I believe it is another way the FCA can bully the broker community.

  2. I have been advised that regulated business is not covered by the edict covering charging broker fees (i.e. is not regulated) But that non-regulated business is covered by the edict – (i.e. it is regulated).

    How mad is that???

  3. For the vast majority of us, I believe this won’t change what we do, as most of us are treating customers fairly – just need to add the required statements to websites and online profiles, etc from what I gather.

    I do come across many clients in my local area that have paid an upfront fee of a few hundred pounds to be told they’re not eligible, and it’s obvious to me from the outset. EG, recently, a client looking for a commercial mortgage at 75% when she only has resi experience. If you tout yourself as a commercial broker, you can tell the client straight away they need a 35% deposit for this. Yes we need to charge for our expertise, but if the said broker is an expert, he would know this.

    Sadly I do come across clients who are falling victim to a “Broker” who is earning money by not getting anyone a mortgage. I know we all want this stamped out.

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