Out-Law News | 03 Dec 2014 | 10:28 am | 1 min. read
The new rules will come into force on 2 January 2015 and will not be consulted on, because "the delay arising from the time it would take to consult would be prejudicial to the interests of consumers", the FCA said. The speedy introduction of the rules was necessary because "enforcement action alone is not sufficient to protect consumers", the regulator said.
"Introducing rules without public consultation is a significant shift in approach and only time will tell if the FCA will be challenged," said financial regulation enforcement expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com. The new rules are the first to be introduced by the FCA without consultation beforehand.
The new rules have been published in response to concerns from consumer groups that people had been having money taken from their accounts unexpectedly, and often from more than one broker, by firms that they did not realise were not themselves lenders, the FCA said. The regulator is currently investigating a number of credit broking firms, seven of which have already been stopped from taking on new business, it said.
From January, brokers that wish to charge a fee for their services will have to provide clear information about what fees will be payable, and when and how that payment will be taken. They will have to include their legal name and not just their trading name in all advertising and communication with customers, and to state prominently in all advertising that they are a broker and not a lender. The customer must also acknowledge receipt of this notice before a fee can be charged. Firms that do not do this will not be able to charge fees, or to request payment details from customers for the purposes of charging fees.
A new 14-day right of cancellation and right to a refund will be introduced where credit broking contracts are entered into as 'distance' contracts, for example those that are concluded online. Fee-charging firms will also have to report to the FCA, listing their website domain names, on a quarterly basis.
The FCA said that 41% of consumer credit complaints it had received since it took over regulatory responsibility for the sector in April related to credit brokers, and that 80% of those brokers charged upfront fees.
"The fact that we have had to take these measures does not paint this market in a particularly good light," said FCA chief executive Martin Wheatley. "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."