New Rules for Credit Brokers

The FCA has updated CONC rules for Credit Brokers who charge upfront fees to consumers.

This is in response to significant concerns about the practices of some credit brokers. Some 41 per cent of all the 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.

They are particularly concerned about the High Cost Short Term Credit (HCSTC) market but the new rules could affect any broker. 

The FCA’s primary concerns were:

  • Consumers did not realise they were dealing with a broker and not a lender;
  • Hidden / lack of information regarding consent to take fees;
  • Consumers being misled for the purpose of giving their payment details i.e. using the details consumers thought were for the loan, to take the fee;
  • Passing consumer details, without informed consent, to other firms that also take fees; and
  • Consumers not being able to identify the firm taking the payment.

The New Rules, to quote from the FCA: 

  • Ban credit brokers from charging fees to customers, and from requesting customers’ payment details for that purpose unless they meet FCA requirements;
  • These 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, quarterly, 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;
  • There are additional rules on cancellation rights for distance contracts (for example, online credit broking), including rights to a refund. The new rules clarify that credit broking contracts have the 14 day cancellation right.

The Policy Statement PS14/18: Credit broking and fees and summary can be found here.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

It is essential that you understand the requirements when charging fees for credit broking and have fully transparent and compliant documentation.

Remember this must be clear, fair and not misleading.

 

Action Required By You

You must have a thorough understanding of the new rules that include but are not limited to CONC 3.7 ‘Financial promotions and communications: credit brokers’  and the CONC 4.4 ‘Pre-contractual requirements: credit brokers’.

You must also have the systems and controls in place to ensure that all procedures are being followed.

We suggest that you:

  • Read the Policy Statement and familiarise yourself with the new rules;
  • Review and update your consumer documents;
  • Ensure all relevant staff are aware of the changes;
  • If in doubt contact your ATEB consultant or ATEB directly here and we can audit your exiting documents and help design new ones. 
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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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