Under the new rules credit brokers must ensure that customers are given clear information about who they are dealing with, what fee is payable and when and how the fee will be payed.
Failure to do so will result in sanctions being imposed upon the broker including a ban from charging fees to customers and from requesting a customer’s payment details for that purpose. The new rules will come into effect on 2 January next year.
Martin Wheatley (pictured), chief executive of the FCA, said: “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.”
Among the concerns highlighted by the FCA was a lack of transparency, resulting in consumers being unaware that they are dealing with a broker as opposed to a lender.
In January this year a report by Citizens Advice issued a warning over credit brokers posing as payday lenders. It said that these credit brokers were also passing on consumers’ details to other brokers who then siphon further charges.
Other measures that brokers will now be required to undertake as part of the FCA’s crackdown are; including their legal name not just their trading name, in all advertising and other communications with customers. They will also have to state explicitly that they are a broker and not a lender and report quarterly to the FCA listing their website domain names.