The Consumer Credit Act 1974 lays down rules for the refund of fees by brokers to customers. These say that if, for any reason, an introduction by a broker to a prospective lender does not lead to completion of the mortgage within six months, the broker may not charge the customer more than £5 for their services.
These statutory requirements have recently been underpinned by clear guidance from the Mortgage Code Compliance Board (MCCB) on good practice for the refund of fees. This specifically addressed the definition of the broker’s fee because it has caused confusion. But the board concluded that it is clear that any fees or commission charged by brokers for services in connection with arranging a loan fall within section 155 of the Act, and are, therefore, covered by the refund rules.
Brokers can make an exception for legitimate disbursements that have been genuinely paid to a third party, for example, valuation fees. These do not have to be returned to the customer.
Refunds continue to be a major issue for customers and were the subject of almost half the complaints to the MCCB’s helpline in 1999/2000. The board says brokers committed to good practice should ensure that fee disclosure is transparent and that documents given to customers do not contain statements about fees being non-refundable where they fall within section 155 of the Act.
The Department of Trade and Industry (DTI) is about to embark on a review of consumer credit legislation, although the extent to which this will cover broker fees is not clear at this stage. The DTI is, however, likely to consult on the scope of the review before work on it begins.