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New rules for credit brokers come into force on the 2nd January 2015. Credit brokers will only be able to charge fees if they follow the new disclosure rules announced today by the FCA.
Credit brokers will not be able to charge fees unless they do the following:
The broker must provide an explicit notice to the customer in an ‘information notice’ setting out:
- the firm’s legal name;
- a statement that the firm is, or is acting as, a credit broker (not a lender)
- a statement that a fee will or may be payable;
- the amount or likely amount of the fee;
- when and how the fee will be payable; and
- the customer has acknowledged receipt of the notice, and awareness of its contents, the ‘customer confirmation’
Each broker will have to send its own information notice, and receive its own customer confirmation, before being able to charge a fee. The information notice and customer confirmation must be on paper, by email, or in another durable medium, and the broker will have to keep records of them.
Transparency: credit brokers will need:
- to include their legal name (as it appears in the Financial Services Register) in all financial promotions and communications with customers;.
- to state prominently in all financial promotions that the firm is, or is acting as, a credit broker and not a lender; and in the case of fee-charging brokers, to notify the FCA quarterly of their domain names if charging fees
Right to cancel:
Clarification that consumers have a 14-day right of cancellation and right to a refund where credit broking contracts are entered into as distance contracts (e.g. online).
These measures have been introduced as the FCA have concerns over a lack of transparency, resulting in consumers often not realising they are dealing with a broker rather than a lender. They are concerned fees are being taken without informed consent, for example where terms and conditions are hidden or misleading. That firms are passing on consumers’ details, including their payment details, without informed consent, to other firms who also take a fee; and consumers facing difficulty in identifying the firm that has taken a fee, and in obtaining a refund from the firm or a response to their complaint.