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There has been a lot of talk around the FCA, Britain’s Financial Conduct Authority, introducing new rules for credit brokers. The FCA new rules are to protect consumers as they found some credit brokers were treating consumers in a “blatantly unfair” way and causing serious harm.
This is the first time the FCA has introduced new rules in the consumer credit sector without consulting the public beforehand, as the FCA believes that the time it would take to consult would be prejudicial for consumers.
Chief executive of the Financial Conduct Authority, Martin Wheatley said in a statement:
“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 claim that 41% of all complaints received since April 1st by the FCA’s Consumer Credit Department relate to credit broking, and around 80% of these are about online brokers charging upfront fees.
The concern is that a number of brokers have been found to take fees up front, before any services are provided, and without customers authorising the payment or realising that payment would be taken. They also found brokers passing customers’ details, including payment details, to other firms who also take fees without the customer’s informed consent.
The FCA is investigating a number of credit broking firms; seven firms have been stopped from taking on new business and, to date, three further cases have been referred for enforcement action.
The FCA new rules are as follows and come into effect on January 2, 2015:
- 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 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.
Clearly, the FCA means business, and they are here to protect the customer. I’m all for that too, we have a moral responsibility to ensure that the consumer is not being taken advantage of. However I do have a point of concern and that is with the fact the FCA introduced these new rules without any consultation. By doing so I think they are discounting that we have a robust and mainly very well operating industry, meaning to say; a few bad apples have been allowed to taint the bunch. I personally think they could have banned the brokers in question (which they had already done) and then had a consultation for the new rules. By cutting the industry out of the discourse they run the risk of creating long term problems between themselves and those they are looking to regulate.
