2 June 2011

Loan Brokers who charge fees but don’t find a loan to face crackdown

Upfront loan fees in the focus for the OFT as they launch an offensive against unscrupulous behavior in the industry. We have guidance on avoiding such fees.

Credit unions welcome crackdown on unscrupulous loan brokers

ABCUL – the Association of British Credit Unions – has welcomed the crackdown announced by the Office of Fair Trading (OFT) on the poor and unfair practices of some credit brokerage companies.

Following a Citizens Advice led super-complaint highlighting upfront fees some credit brokers charge customers for supposedly finding an unsecured loan – only for no loan to be arranged – the OFT is issuing new guidelines setting out its expectations of credit brokers and debt management companies, and it is also asking the Government to consider new legislation to address problems in the sub-prime unsecured credit brokerage market, including a possible ban on upfront fees.

Even credit unions, who assist in arranging finance for some of the most financially hard pressed in the community, have seen enquiries from those who paid fees from £50 upwards to such brokers for the referral – although no credit union in the country has any relationship with such companies and treat such approaches in exactly the same way as someone who found them from a website article such as this one or telephone directory.

The Chief Executive of ABCUL, Mark Lyonette, said: "We're very pleased to see the OFT taking action against some of the most unscrupulous practices in the credit brokerage industry.

"In recent years, there seems to have been an explosion in the number of businesses specifically targeting people in difficult financial circumstances and generating profits from outrageous fees and charges.

"Credit unions have been inundated with enquiries from people referred to them by credit brokerage companies, and are rightly angered that financially vulnerable people have been persuaded to pay such brokers a hefty fee for what is essentially no more than a note of the credit union's contact details.

"Anyone looking for a local credit union can find the information freely available at www.findyourcreditunion.co.uk, or call ABCUL on 0161 832 3694.”

Mark Bower, Managing Director of MoneyMaxim said "Consumers need to be very careful when asked for any ‘upfront fee'. As a business ourselves we will not offer any company who does so, and in fact companies have agreed to waive their fees to be featured on MoneyMaxim. If there is to be a fee it should only be levied after any loan has been offered and paid on completion of the deal.”

For unsecured loans customers can refer to our personal loan guide, whilst our mortgage team (part of the largest fee free mortgage company in the UK) can be contacted on 0800 520 0699 (01183 218197 from a mobile)