Even if you do not offer credit yourself, you may want to introduce your customers to a third party to enable your customers to access funds to purchase your goods and services or hire your goods. If you choose to do this, you may be deemed to be a credit broker. To act as a credit broker, you must have a consumer credit licenсe for your business. If you do not have a consumer credit licence and introduce your customer to credit facilities you could be subject to enforcement action and financial penalties. On 1 April 2014 responsibility for credit licensing passed from the OFT to the Financial Conduct Authority (FCA). Credit licences in force prior to April 2014 were transferred, on application, to the FCA on an interim permission to allow the business to continue using their licence after April 2014.
According to the FCA there is a short summary of rules for credit brokers which affect non-fee charging and fee charging brokers.
All credit brokers are banned from charging fees to customers, and from requesting customers’ payment details for that purpose unless they comply with our requirements:
Firms need to ensure customers are given clear information about who they are dealing with, what fee will be payable, and when and how the fees will be payable – known as the ‘information notice’
Firms also need to obtain confirmation from customers that they are aware of the information notice and its contents – known as the ‘customer confirmation’.
Correspondence with customers
All brokers need to include their legal name (as it appears in the Financial Services Register) in all advertising and all correspondence with customers, not merely their trading names.
Advertising and financial promotions
All credit brokers need to make clear in their advertising that they are brokers and not lenders; if they are both a broker and a lender, if the advertising is solely promoting its credit broking services the advertising will need to make clear that it is for the firm's broking services, not their lending services.
All credit broking contracts that are distance contracts have the 14-day right of cancellation and right to a refund required by the Distance Marketing Directive.
Treating customers fairly
All credit brokers must pay regard to the interests of their customers and treat them fairly. All customer communications should be clear, fair and not misleading. Firms must ensure that their charging policy is clear and accessible.
Payment authorisation and consent
All credit brokers are prohibited from taking a fee from a customer’s bank account without express authorisation from the customer. We expect the amount, or likely amount, of the fee to be disclosed as early as possible.
Sharing of personal information
All credit brokers are prohibited from unfairly passing customers’ data – including payment details – to third parties, without consent or for a purpose other than that which consent was given. This is also likely to breach the Data Protection Act.
Advertising and marketing
All credit brokers’ financial promotions (including websites) must be clear, fair and not misleading. Firms must not mislead as to their identity or status.
Transparency of status
All credit brokers must make clear in financial promotions and other documents intended for customers their status, including the extent of their powers, the nature of the service they provide and any links to lenders.
Transparency of fees and commissions
Fee-charging credit brokers must disclose any fee payable at an early stage and have it agreed in writing before a credit agreement is entered into. The disclosure must include how and when the fee is payable and whether a refund may be available. Firms must also disclose their fee (if any) to the lender to enable the lender to calculate the correct APR.
All credit brokers should respond promptly to any request for a refund, and if a refund is required, pay it promptly. Section 155 of the Consumer Credit Act entitles the customer to a refund (less £5) of any brokerage fee if a credit agreement is not entered into within six months of an introduction to a source of credit.