LONDON - Britain's financial regulator has imposed stricter rules on firms that help customers to find a loan, saying that poor practice in the credit broking market is causing serious harm.
In its first move to impose rules without public consultation the Financial Conduct Authority (FCA) said that credit brokers will be banned from charging fees and requesting customers' payment details unless the brokers provide clear information in advance.
Credit brokers often act as a gateway to payday lenders, a sector the FCA has already cracked down on by introducing a cap on interest rates from January, when the tougher rules on credit brokers also come in.
The new rules require that brokers first make clear to customers with whom they are dealing, the size of the fee and how that fee will be payable. A brokers must include its legal name, not only a trading name, in all advertising and state prominently that it is a broker and not the actual lender.
Customers will also have a 14-day right of cancellation for contracts made online.
"That we have had to take these measures does not paint this market in a particularly good light," FCA Chief Executive Martin Wheatley said in a statement.
"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."
The FCA said that seven brokers so far have been stopped from taking on new business and three further cases have been referred for enforcement action.