National advice charity Citizens Advice (CitA) has hit out at the actions of some credit brokers. Their concerns relate principally to the size of fees being charged by brokers and the lack of transparency surrounding this.
490 issues regarding the actions of credit brokers were reported to CitA during June and July 2013, and it is claimed that 40% of the complainants had issues regarding the fees they had been charged. Of those complaining about fees, 58% say they were asked to pay fees that they had not expected to have to pay. The other 42% reported a variety of concerns ranging from being asked to pay fees that were higher than agreed, or for services they never agreed to receive.
Other borrowers have been led to believe that a broker is in fact a lender, sometimes because they received misleading marketing texts similar to those sometimes sent by payday lenders. CitA thus believes that the true number of complaints about brokers is much higher as many do not realise they have been dealing with a broker.
Other issues reported to CitA include: passing details to other brokers without the client’s consent, taking money from consumers who did not even complete the application process – some 19% of complainants never even took out a loan, and failing to refund fees where loans are not taken out.
CitA is now asking MPs to debate the subject of brokers’ conduct and to take action.
Credit brokers, like lenders, are currently subject to regulation by the Office of Fair Trading, but will come under the jurisdiction of the Financial Conduct Authority (FCA) from April 2014. CitA has urged the FCA to treat credit brokers as a priority area when it takes over responsibility for their regulation.
Citizens Advice Chief Executive Gillian Guy commented on these issues by saying: “Credit brokers should not be making people’s money problems worse by charging unexpected fees. In some cases, brokers are preying on people’s need for short-term credit and adding to the pain of poor payday lending by posing as a direct lender.”
Ms Guy then added: “Credit brokers must be transparent about the service they offer and any fees they charge. The FCA needs to recognise the harm menaces in this industry can cause and come down hard on those who break the rules. Preventing unscrupulous brokers from entering the market in the first place, through a strict authorisation process is essential. The FCA should also be seriously concerned about the prevalence of data sharing among brokers as money is being siphoned from people’s bank account without clear permission.”