The Financial Conduct Authority (FCA) has introduced a series of rules for brokers in relation to what information needs to be provided in order to charge a fee or request a payment without consultation.

The FCA said this was because it considered a delay arising from the time it would take to consult would be prejudicial to the interests of consumers.

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A spokesperson said the new rules were primarily targeted at brokers in the payday lending sector, though the rules would apply to brokers from other sectors as well.

The new rules will come into effect from 2 January 2015, from which date brokers will need to provide explicit notice (‘an information notice’) to customers setting out:

  • The firm’s legal name
  • A statement that the firm is, or is acting as, a credit broker, not a lender
  • A statement that a fee will or may be payable
  • The amount or likely amount of the fee
  • When and how the fee will be payable

In addition the customer will need to acknowledge receipt of the notice (a ‘customer confirmation’), as well as awareness of its contents.

Each broker will need to send its own information notice and receive its own customer confirmation before charging a fee.
The rule changes covered a number of other topics, one of which gave customers a 14-day right of cancellation and right to refund where credit broking contracts are entered into as distance contracts.

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Brokers will be legally bound to include their legal name in all financial promotions and communications with customers; in the case of fee-charging brokers, to notify the FCA of their domain names on a quarterly basis.

As is in the case of the information notice, brokers will need to state prominently in all financial promotions that the firm is, or is acting as, a credit broker and not a lender.

The FCA said over 40% of consumer credit complaints received by the FCA relate to credit brokers, 80% of which relate to firms who charge upfront fees. It also claimed it had received relevant intelligence from consumer groups and others who are seeing increasing complaints from people who have had money taken from their accounts unexpectedly and often by more than one broker.

Martin Wheatley, chief executive of the FCA said; "The fact that we have had to take these measures does not paint this market in a particularly good light. I hope that other firms will take note that where we see evidence of customers being treated in a blatantly unfair way, we will move quickly to protect consumers from further harm."