We Don't Charge Upfront Fees!
What is a Credit Broker?
A Credit broker generally does not lend money. The broker's role is to help customers who require credit find a suitable lender. They can also introduce customers to other credit brokers who may have access to a more suitable form of credit.
Credit can include a cash loan, or financing the purchase of an item or service over several future instalments.
All businesses who act as a credit broker must have a consumer credit license issued by the Office of Fair Trading (OFT). This regulation applies to virtually all kinds of credit, from pawn broking to mortgages.
Why Use A Credit Broker?
Credit brokers can act for their customers in finding the most appropriate credit product. They will assess an initial application, and introduce the customer to a lender which may be willing to provide credit. This saves the customer from making multiple applications to different lenders.
Different lenders have various lending policies and criteria - many factors are taken into account Credit history, residency status, marital status, employment status and age are just some of these factors.
These factors are put together to calculate a credit status, or credit score. It is when all these details have been considered that the lender will make a decision as to whether to grant a loan or not.
How Does a Broker Make Money?
When a broker introduces a customer to a lender, that lender will make a lending decision. If a loan is granted, and the customer believes that the deal offered is acceptable, the loan is paid to the customer. At this point, the lender will pay a commission to the broker in return for introducing the customer.
Because the broker is paid when a loan is taken out, it is in the broker's interest to find a loan that is acceptable to the customer - if the customer declines the loan offer, the broker does not get paid.
Some brokers also charge customers up-front fees.
What is an Up-Front Fee?
This is a practice where some brokers demand a fee from customers before they will try to find a suitable loan. Typically, these brokers charge from £49.95 upwards, and in some cases charge well over £100.00. They advertise that once a fee is paid, they will find a loan for you.
Does an Up-Front Fee Guarantee a Better Service?
In our opinion, no. It may even be the opposite. If a broker has collected an up-front fee, he or she has less incentive to find a suitable loan for the customer - after all, a profit has already been made!
Brokers who charge an up-front fee do not have access to special or exclusive loans - all brokers can access all lending products, either via their own panel of lenders or through a relationship with another reputable broker.
Paying an up-front fee doesn't give an advantage in finding a better loan. We have heard numerous reports of customers being offered totally unsuitable offers - for example, a customer needing a £5000 loan for a car might be offered a payday loan for £80. The unscrupulous broker may then claim that they have found a loan for their customer, and their fee is justified.
We will leave you to decide if that sounds fair.
What are the Rules on Up-Front Fees?
Fees, however unethical they may seem, are legal. However, there are strict rules.
- The maximum unconditional fee that may be charged is £5
- The law says that any fee paid above £5 this must be refunded, and the customer may sue the broker if a refund is refused. Failure to refund fees may put the broker at risk of losing their consumer credit license or action under the Enterprise Act in order to ensure compliance. Additionally, they may be deemed to be in breach of the Consumer Protection from Unfair Trading Regulations 2008
- Fees must not, by law, be advertised as non-refundable, or any clause put in a contract to this effect.
What If a Refund is Refused ?
We would advise the following course of action.
1. Find the broker's address from their website. If it is not advertised, call the Office of Fair Trading and they will be able to tell you the address. Their telephone number is 020 7211 8000. Write to the broker, giving your name, address and any reference number(s) you have. Ask for a refund within 7 days. Inform them that if you do not get a refund in this time, you will take the matter further without further notice.
2. If they write back to refuse a refund, ignore the letter (but keep it).
3. After 7 days of your letter, write letters explaining the situation to the Office of Fair Trading, The Financial Ombudsman Service and to the Trading Standards Department of the town or city in which the broker is based.These organisations will investigate the broker on your behalf.
In summary, there is no need to ever pay an up-front fee to a credit broker. And if you have already done so, you are entitled to a refund.
At Unsecured Loans For Tenants, we do not charge an up-front fee, and never knowingly do business with any other company which does so.
Addresses:
Enquiries and Reporting Centre
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London
EC4Y 8JX.
The Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London E14 9SR
Trading Standards: Contact the local council for the area in which the broker is based.
