Thousands of payday loan middlemen face tough new rules after the City watchdog highlighted “blatantly unfair” treatment of customers.
Borrowers have complained about credit brokers taking fees without permission for “half-hearted promises” of payday loans.
Some have complained that they thought the brokers were, in fact, lenders.
The Financial Conduct Authority (FCA) said clear contracts must be made explaining fees that could be levied.
New rules, that come into force on 2 January, mean that credit brokers must give clear information to customers about who they are, what fee is payable, and how payment can be made.
In addition, seven brokers have been stopped from taking on new business while investigations into their actions take place. Another three have already been told they could face a fine or lose their licence to operate.
Owing to the swift rise of payday credit brokers, primarily online, and the number of complaints, the FCA said that it was bringing in the new rules without consultation with the industry.
“The fact that we have had to take these measures does not paint this market in a particularly good light,” said Martin Wheatley, chief executive of the FCA.
“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.”
But the FCA said that the new rules would not come into force for a month, as tens of thousands of brokers needed to prepare for the new requirements. Read more….