Credit broking

What is credit broking?

Credit broking happens when:

• a business introduces a customer to a finance or credit provider
• a customer has been introduced to another credit broker, who then introduces them to a finance or credit provider

An example of credit broking might be where a customer is looking for a loan online and uses a business to find or recommend a finance or credit provider.

Types of complaints we see

We see a variety of complaints about credit broking but some of the more common things consumers tell us about are where they:

• are unhappy about being charged a fee by a credit broker for finding a loan. Sometimes they’ve been charged a fee even when they haven’t actually got a loan
• are unhappy they’ve not had their fee refunded when they’ve not taken out, or even been offered, a loan
• are misled or not correctly informed about the terms or cost of the loan

What we look at

We’ll look at the facts and circumstances of each complaint. We’ll listen impartially to both the credit broker and consumer when deciding what's fair and reasonable in the circumstances.

We’ll also take into account any relevant laws, regulations and codes of practice. These may include the:

• Financial Conduct Authority (FCA) handbook: consumer credit sourcebook (CONC)
• FCA Credit broking firms: key rules
• Consumer Credit Act 1974

We’ll consider what information was given to the consumer to ensure it was clear and not misleading. Some of the information we would usually expect the credit broker to provide includes:

• whether they’re a broker or lender
• their legal name so people know who to contact if there’s a problem
• the fees that customers need to pay, and when and how they need to pay them
• the details of the loan being offered
• whether someone’s details might be passed to other companies

If the credit broker didn’t give the consumer clear information – we might tell them to refund some or all of the fees charged, sometimes with interest.

If a customer didn’t want the loan, we’ll need to know:

• whether they got in touch with the credit broker or the credit provider
• what the credit broker and/or credit provider said in response

The FCA handbook and ‘key rules’ for credit brokers set out how credit brokers should treat customers. These include requirements around pre-contractual obligations, transparency of status, fees and refunds.

Under Section 155 of the Consumer Credit Act 1974 customers are entitled to a refund of all but £5 of a credit broking fee if they haven’t taken out a loan found by the broker within 6 months.

The credit broker is allowed to keep £5 of any fee if the customer hasn’t taken out a loan. However, we would likely find that it’s unreasonable to keep even £5 if the customer didn’t authorise the fee in the first place, or the broker didn’t do enough work to justify keeping the fee.

We would expect a credit broker to demonstrate the work they had undertaken to find a loan on behalf of the consumer.

We’ll generally ask a credit broker to refund some or all of the credit broker fee if:

• the consumer contacted the credit broker asking to refund the fee because they didn’t want the loan
• fees weren’t made clear to the consumer (whether or not the broker found a loan)
• the consumer didn’t authorise payment of the fee

Credit brokers shouldn’t refuse to refund the fee - or wait 6 months to refund it. Any refund should be carried out swiftly if it’s clear the consumer would not be taking out a loan. We’ll check that the credit broker quickly refunded the fee when the consumer contacted them to say they didn’t want a loan.

Where the complaint relates to the consumer not being correctly informed about the terms of the loan agreement we’d look at the impact of that and what the consumer would have done differently had they been correctly informed.

Putting things right

If we decide you’ve treated the consumer unfairly, or have made a mistake, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn’t happened. The exact details of how we’ll ask you to put things right will depend on the nature of the complaint.

Many people who contact us about credit broking have wider financial difficulties. Having fees taken from their bank account unexpectedly can cause further problems and charges. If we find instances of unfair or unauthorised fees we’ll usually tell the credit broker to:

• refund the fee (sometimes with interest)
• refund any additional costs incurred by the customer if they weren’t aware of the credit broking fee being taken from their bank
• pay compensation for any trouble and upset caused

Resources

Businesses and consumer advisers can contact our technical desk for general information on how the ombudsman might look at a particular complaint, or for guidance on our rules and how we work.

Search our database of published ombudsman's decisions.

Take a look at some of the key rules, guidance and legislation in this area:

• Financial Conduct Authority (FCA) handbook: consumer credit sourcebook (CONC)
• FCA Credit broking firms: key rules
• Consumer Credit Act 1974