OFT issues new rules to credit brokers

The Office of Fair Trading has set out new guidelines to both intermediaries and credit brokers in a bid to improve the way in which customers are treated.

The guidance document covers complaint handling as well as refunds and sales and marketing techniques that the watchdog will expect to be followed implicitly.

The revision has partially arisen after consumer champion Which? submitted a super-complaint about the treatment that many customers received from credit brokers a few months ago. However, the final document which has been released goes far beyond the issues raised by Which?

The consumer body had submitted a complaint about consumers having money debited from their account, often without their knowledge, as well as hard-sell cold calling techniques.

The OFT has warned firms that going forward they must be entirely transparent over their fee structure, as well as letting customers know whether they will be eligible for a refund. In those cases where a refund can be requested, the intermediary or broker must ensure that the request is processed timely and not delayed without good reason.

The guidance also deals with the topic of fees being charged and the promised service not following. One of the main causes of complaints by consumers were from those who paid an arrangement fee in order to get a loan, possibly because they had a history of bad credit, only to find that the broker was unable to get the finance promised.

The document released by the OFT makes it crystal clear to firms that they must be far more honest about what fees can be expected, how much commission is included and whether they are tied to any particular provider.

The OFT has also warned firms they must not continue to abuse premium rate telephone lines and has said that the practice of deliberately detaining customers to rake in more money must stop.

The OFT is currently lobbying the government over the practice of charging fees in advance of services provided and has proposed that the practice is outlawed, to prevent any more customers being conned into handing over money.

However, until this happens, any individual or firm found not to be complying with the new guidelines will find the OFT taking enforcement action against them, a move which could ultimately result in their licence being revoked.

The government has been looking at the area of personal finance and despite introducing a voluntary campaign for shops to sign up to, has failed to take any action against the growing band of payday lenders and doorstep finance firms.

Retailers which offer store cards have been encouraged to sign up for a voluntary code of conduct which prohibits them from getting new customers by offering discounts. But although participating shops can now no longer offer incentives for new customers to sign up, they are still free to charge whatever interest rate they choose, much to the frustration of pressure groups.

The interest rate on store cards can be as high as 30% in some cases, whilst payday lenders are even worse and campaigners have said that the government's promise to review them by next summer is not sufficient. Ministers have formally acknowledged the 'upsurge of concern' and has said the subject of capping interest rates will be investigated and the findings published by the middle of next year. However, those lobbying the government to take more urgent action have said that not taking immediate action means that even more consumers will have fallen into debt, the victim of firms who whilst technically legal, are unethical and a major contributory cause to many households' financial woes.

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