On September 14 2015, the Financial Conduct Authority (FCA) announced that it had withdrawn the interim permission of Bury, Lancashire-based credit broker Merlin Loans & Mortgages Limited. The firm no longer has permission to offer credit-related services, and will not be able to obtain full permission in due course.
The firm lost its permission over what seem to be fairly trivial sums of money. Two customers complained that the firm had taken fees of £49.95 each from their bank accounts without permission. The cases were referred to the Financial Ombudsman Service (FOS), which ruled that the fees should be refunded, but despite repeated requests, Merlin did not comply with this instruction.
The FCA considers that the firm’s actions breached two of its high-level principles. Principle 6 says that: “A firm must pay due regard to the interests of its customers and treat them fairly.” Principle 11 requires firms to deal with regulatory bodies in a co-operative manner.
The regulator therefore believes that Merlin is failing to satisfy one of threshold conditions – the basic criteria all authorised firms must meet- because the firm is not ‘fit and proper’ to carry out financial services activity.
Merlin did not appeal the FCA’s decision to the First-Tier Tribunal.
A credit broker cannot request or take a fee or charge unless it complies with a series of recently introduced FCA rules.
Firstly, the firm must provide a credit broking information notice, which communicates the following information to the customer in a durable medium (a format which allows the customer to take away the agreement and consider its provisions):
• The full legal name of the firm as it appears in the Financial Services Register
• A statement that the firm is a broker and not a lender (or if the firm also acts as a lender, a statement that it is acting as a broker for the purposes of this transaction)
• That the customer is required to, or may be required to, pay a fee or charge for the firm’s services
• The amount of the fee or charge, or where this is not known, the basis on which it will be calculated
• When the fee or charge is payable, and details of the method by which the payment will be collected (e.g. via deduction from the contract, via cheque, bank transfer etc).
These requirements also apply to any fees to be paid to third parties.
(Apart from the firm’s trading name and contact details, no other information should be included on the information notice).
Secondly, the firm must receive confirmation from the customer, also in a durable medium, that they have received the above information and are aware of its contents.
The firm must maintain records of each information notice, and the associated customer confirmations.
Customers must also be informed of the circumstances in which a refund of this fee may be available. Section 155 of the Consumer Credit Act requires brokers to refund their fee, less £5, if the customer has not effected credit within six months of the date their details are referred by the broker.
Any decision made by the FOS is legally binding, and once a firm has appealed against an adjudicator’s decision by asking for an ombudsman review, they must promptly pay any redress that is due. Failing to do so is likely to mean that the firm will lose its FCA authorisation.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.