FCA releases policy statement on Credit Broking Fees
The FCA exercised its authority over firms involved in credit broking yesterday, when it issued its first policy statement that provides new stricter rules on the fees being charged by firms who are active in the credit broking market.
The key drivers behind the policy statement are the FCA's concerns that:
- customers don't understand that they are dealing with a broker not a lender.
- there is a lack of consent to paying fees. These are often hidden and misleading.
- consumers are being misled as to the purpose of giving payment details.
- firms are passing on payment details without consumer consent, to firms who then charge a fee.
- consumers are facing difficulty in identifying when a firm has taken payment and in obtaining a refund when they complain.
The FCA has identified that this is causing wide scale detriment and is introducing strict rules which come in to effect from 2nd Jan 2015. The new rules do not, however, apply to the broking of loans on land
From the date of its introduction, credit brokers are banned from charging fees and from requesting payment details from customers for the purpose of charging fees unless:
The firm had provided in writing to the customer, an agreement which details:
- the firm’s legal name.
- a prominent statement confirming the firm is a broker - and not a lender.
- a statement that a fee will apply.
- the amount or likely amount of that fee, as well as when and how it is paid.
The customer must then provide written agreement that he accepts the fee is being charged.
Firms who operate websites must ensure that a customer, who has not given written consent, must not be directed to an area of the site where fees or payment details are taken.
The rules apply to all fees, irrespective of its description and whether it is payable to a third party.
Brokers that charge fees will be required to notify the FCA on a quarterly basis of the details of their web domain, so that the supervisory team can monitor a firm’s practices.
This requirement applies to firms with interim permissions as well as those who are fully authorised.
Credit broking agreements that are not conducted on a face-to-face basis, must include a 14 day cancellation notice and, should a customer apply this right, all payments must be returned within 30 days.
Firms are required to keep records of any pre-sale agreements as well as the clients consent for a minimum of 18 months.
Templates will shortly be available through the Compliance Hub that will ensure you remain compliant with these changes.