Credit brokers explained

This page explains:

• what credit brokers are

• how credit brokers are authorised

• when credit brokers can charge you a fee

• how they can use your personal information.

What is a credit broker?

Check your borrowing options

Payday loans are a very expensive way of borrowing. You may have other options such as a credit union loan, an overdraft or a Social Fund loan.

Make sure you’ve considered all your options before you decide to take out a payday loan.

Credit brokers offer services to help people find credit (for example a payday loan), by comparing the market and introducing you to a company that can offer you a deal. You may have used a credit broker when you were searching the internet for a payday loan or another type of credit, or if you responded to a marketing text message inviting you to take out a loan.

Sometimes you may not have even been aware that you were using a credit broker. You may find you have unknowingly signed up to use their services thinking you were:

• applying directly for a loan

• using a comparison site or credit reference agency to try and find the best loan for you

• responding to marketing texts, emails or calls inviting you to take out a loan.

If you’re not sure whether you’re dealing with a direct lender or a credit broker, look at the firm’s website or other communications with you. Credit brokers must tell you that they’re a credit broker and not a lender.

Is the credit broker authorised?

Before you use a credit broker, you should check they’re authorised. Legitimate credit brokers are authorised and regulated by the Financial Conduct Authority (FCA) and are listed on the Financial Services Register. From 2 January 2015, all their communications with you should also make it clear that they are a credit broker and not a direct lender.

You’ll find the credit broker’s legal name on all its communications, such as its website, emails, phone calls, text messages and letters. You can use this name to check that a credit broker is authorised on the Financial Services Register.

You can also check which credit brokers to avoid on the FCA website.

Fees and charges

Watch out

If a credit broker does any of these things, this is a scam:

• asking you to pay a fee via a money transfer service such as Western Union or UKash

• asking you to pay more money on top of the fee, such as a transaction tax or payment protection insurance.

If you’re being scammed, you can report a credit broker to Action Fraud.

In the past, some people had problems with credit brokers taking fees that customers hadn’t agreed to. However, from 2 January 2015 credit brokers are now only allowed to charge you a fee or ask you for any payment details if both of the following conditions are met:

• the credit broker has given you a written information notice setting out details of the fees, and

• you’ve acknowledged and agreed to the information notice in writing. Agreeing over the telephone isn’t enough.

The information notice must tell you:

• who you’re dealing with – by including the credit broker’s legal name

• that the firm is a credit broker and not a lender

• how much you’ll pay or are likely to have to pay

• when and how the fee will be paid.

These rules don’t apply to credit that is secured on land.

If a credit broker has charged you a fee or taken payment details from you without keeping to these rules, you can complain and get your money back.

If a credit broker passes your payment details on to another credit broker, that new credit broker isn't allowed to charge you a fee until you've had an information notice and have agreed to be charged.

• Taking action over credit brokers.

Using your personal details

As part of the registration process with a credit broker, you may be asked to tick a box saying that you agree to your details being passed on to ‘carefully selected’ third parties. You may start to get unsolicited texts, calls and emails from other credit brokers offering you additional loans.

If your details are being used in this way or you’re receiving communications from other companies when you didn’t agree to your personal details being shared, you can complain. If these companies have charged you fees that you didn’t agree to, you can get your money back.

• Taking action over credit brokers.

Next steps

• Other options for borrowing money