Credit brokers

Credit brokers are firms which can help find you a loan, for example if you have a poor credit history.

Some credit brokers operate online through websites and specialise in payday loans and other high-cost short-term credit.

Some are paid commission by lenders but others will charge you a fee for their services.

Some firms haven’t made it clear to customers they are credit brokers – their websites might have implied they’re a lender who can provide a loan directly to borrowers.

Other credit brokers didn’t make it clear they would charge a fee for their services, or how much this would be.

And some took payments from consumers’ bank accounts without permission and without providing the service they had promised.

Often people were unaware they were actually signing up for a credit broking service.

They shared their bank details because they were told this was needed to confirm their identity or to allow the lender to make a credit check.

They didn't realise money would be taken from their account.

Once people had given their personal details, some credit brokers would pass these on to other credit brokers, also without the customer’s knowledge or consent.

Customers would then find other firms had also charged fees.

In many cases, the customer had several fees taken from their account but did not end up with a loan.

When they complained, they often found it difficult to contact the firm, or were given excuses for why a refund could not be given – even though by law the customer was often entitled to their money back.

Some of these credit brokers were not registered with the Financial Conduct Authority (FCA) or were trading illegally under a different name.

If you’ve signed up to a credit broking service online or by phone and decide you no longer want it, you can cancel and ask for your money back.

But you have to cancel within 14 days of signing up.

You don’t have to give a reason why you want to cancel and the credit broker should refund any fees you have paid within 30 days.

The broker can only retain part of the fee if it has actually provided you with a service during the period before you cancel.

If you’ve given payment details to the credit broker, you might have agreed to a Continuous Payment Authority (CPA) – even if you didn’t realise it.

A CPA allows a company to take money from your bank account.

You can cancel the CPA by telling the credit broker or asking your bank or building society to stop further payments.

Your bank should comply with this – but you need to act quickly, ideally before the money comes out.

If a fee has already been taken without your permission, ask the bank for a refund.

If your bank refuses, you can use its formal complaints procedure to complain.

If you’re unhappy with the outcome of your complaint to the bank, you can complain to the Financial Ombudsman.

Before you use a credit broking service, it’s important to check the firm is authorised with the FCA.

You can do this by checking the Financial Services Register

If the credit broker isn’t authorised, you can notify Trading StandardsOpens in a new window or contact the FCA’s customer helpline.

Although these services can’t deal with individual complaints or get compensation for you, they can take action against the credit broker if there is evidence of wrongdoing.

You also need to be aware of potential scams. For example, people have reported being asked to pay a fee between £25 and £450 for credit they then never received. 

FCA rules require all credit brokers to make it clear who they are and what service they’re offering.

In addition, credit brokers are not allowed to charge you a fee or take payment details unless they have first given you an information notice in writing (or by email), which clearly states:

• the firm’s legal name as it appears on the FCA register (not just their trading name)
• the firm is (or is acting as) a credit broker and not a lender
• the firm intends to charge you a fee
• the amount of the fee
• how and when the fee will be charged.

A credit broker can only charge you a fee or pass payment details to another person if you have acknowledged (in writing or email) you’ve received this notice.

If you do decide to use a credit broker, and the broker doesn’t get you a loan within six months, they must refund the fee you paid less than £5.

They should tell you about this when you sign up.