The last year has seen a sudden boom of brokers or ‘middlemen’ in the short term credit and payday industry. Traditionally a broker acts as a middle man between the customer and the service providers and is there to primarily find the best possible deal for the customer. For this a broker will charge a fee, but normally only if the broker has secured a satisfactory transaction for the customer. Not anymore. Brokers are popping up everywhere and, like predators, have begun stalking the average Joe with promises of results but instead bleeding his wallet dry.
In the past year the Financial Ombudsman Service report that they received 13,348 complaints from the public reporting bad brokers in the short term credit and payday industry. This in comparison to the 6,376 of 2013.
The proliferation of these brokers is mainly online and customers are pulled in and charged exorbitant fees without results. Customers complain that in many cases they have not been informed of what fees are going to be charged and that once they give out their details, money is automatically withdrawn from their account. Many of these online brokers fail to deliver, but charge the customer anyway.
One case that highlights the problem was reported by NatWest regarding a man who had taken out a 100 pound short term payday loan and was charged over 700 pounds in fees by brokers.
The problem is that these brokers and their blatant exploitation of the payday industry and its customers, reflects on the lenders themselves. Payday companies have had enough controversy and don’t need another dent in their reputation.
The Financial Conduct Authourity (FCA) intends to pass new regulation on brokers within the next month without consultation with the brokering industry. The reason being that considering the rate of escalation of payday credit brokers the FCA finds it imperative to protect consumers from further maltreatment.
Martin Wheatley, chief executive of the FCA made a statement saying,
“The fact that we have had to take these measures goes not paint this market in a particularly good light. 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 payday industry itself welcomes the regulation of the brokering companies as the questionable business practices of the brokers does nothing but shed a poor light on the lenders themselves.
The Consumer Finance Association, which speaks for several legitimate payday credit companies, welcomes the move taken by the FCA. In their opinion brokers should not charge any kind of fee until they deliver a secure deal to the customer.
It is understandable that the payday industry finds bad brokering unsettling, would the solution not be to stop dealing with them altogether.