Guidelines tackle unfair practices by credit brokers
The Office of Fair Trading (OFT) has today published guidelines which should help to stamp out unfair practices by credit brokers and intermediaries.
The guidance also clarifies the responsibilities of businesses who take referrals from credit brokers.
Earlier this year Citizen’s Advice complained to the OFT that credit brokers were cold-calling consumers and offering loans that they had no intention of arranging, in return for large fees which the customer was asked to pay up-front.
Many consumers paid an upfront fee on the understanding that they would receive credit at a certain interest rate, but they either never received the loan, or were offered credit at a much higher interest rate than they had originally agreed.
Following the complaint by Citizen’s Advice, the OFT launched a consultation process in order to address growing public concern over unscrupulous practices.
Other complaints included the unauthorised debiting of customers’ accounts, expecting customers to use premium rate phone numbers and dragging out the length of the call to bump up charges, as well as refusing to refund brokerage fees when it would be appropriate to do so.
David Fisher, Director of the OFT’s Consumer Credit Group, said: “The number of complaints in this area has risen significantly and is a cause for concern.
“Credit brokers and intermediaries must comply with our guidance. Any business that fails to do so will face the risk of enforcement action, which may include revocation of its licence.”
Under the new guidelines, brokers and intermediaries must offer clear information about their status, their fees and the commission they receive, and the customer’s right to a refund.
The OFT is calling on the government to make it illegal for credit brokers to ask for upfront fees in exchange for arranging loans.
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