OFT publishes guidance for credit brokers and intermediaries
127/11 24 November 2011
The OFT has today published guidance which sets out the standards it expects from credit brokers and intermediaries.
The guidance sets out the OFT's view on unfair practices relating to advertising and sales, refunds of fees and complaints handling. It also outlines the responsibilities of businesses that use the services of credit brokers and intermediaries.
The guidance is designed to tackle unfair practices including:
- charging up-front fees and then not delivering the promised service
- unauthorised debiting of customer accounts
- inappropriately asking customers to use premium rate phone numbers, and/or keeping customers who have called a premium rate service on the line for unreasonably prolonged periods
- failure to refund, or delay in refunding, brokerage fees, in circumstances where a refund is due.
The guidance makes it clear that credit brokers and intermediaries need to be transparent about their status, whether independent or otherwise, the payment of fees, the consumer's right to refunds, and commission.
It also addresses a number of the issues highlighted in Citizen Advice's super-complaint earlier this year, including cold calling by telephone or text without the consent of the borrower and taking up-front fees from a borrower's bank account without the prior informed consent of the borrower.
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.'
- The OFT announced a consultation on the credit brokerage guidance on 1 June 2011. See press release OFT announces package of measures to address concerns over credit practices.
- Credit brokers introduce individuals wanting to obtain credit or goods on hire to consumer credit or consumer hire businesses. It is also credit brokerage to introduce individuals to other credit brokers. The Consumer Credit Directive defines a 'credit intermediary' as a person who carries out certain activities in return for a fee or other financial consideration.
- The OFT has previously set out standards of conduct the it expects from credit brokers in other OFT guidance documents such as Non-Status Lending guidelines for lenders and brokers (OFT192), Second Charge Lending - OFT guidance for creditors and brokers (OFT1105) and Irresponsible Lending - OFT guidance for creditors (OFT1107).
- This guidance document sets out the standards of conduct that the OFT expects of credit brokers and credit intermediaries. Further, it provides greater clarity for businesses as to the practices that the OFT considers may constitute unfair or improper practices (whether unlawful of not) for the purposes of section 25(2A)(e) of the Consumer Credit Act 1974 (the Act).
- Complaints to Consumer Direct about credit brokerage for the period January - September 2011 were 2240. Total complaints for credit brokerage in 2010 were 3374.
- Following the publication of the guidance a 'summary of responses' document will be published later this financial year which should act as a 'companion' to the guidance document itself. The OFT will also be making minor amendments to relevant sections of the Irresponsible Lending Guidance to ensure consistency with this guidance.
- The OFT's response to the Citizens Advice super-complaint is available on its project page.
- The Consumer Credit Act 1974 requires most businesses offering credit, lending money or involved in activities relating to credit or hire, such as debt collectors, to be licensed by the OFT. The OFT produces guidance to clarify its expectations of those companies and individuals that hold a consumer credit licence. Failure to have regard to OFT guidance can call into consideration the business' fitness to hold a consumer credit licence.
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