Credit brokers that demand upfront fees from consumers for loans they have no intention of arranging will be shut down, the Office of Fair Trading (OFT) warned yesterday.
The OFT will also ask the Government to consider whether new legislation is needed for the subprime loan broking market, including a ban on such upfront fees.
The announcement comes in response to a super-complaint made by the charity Citizens Advice. The group said tens of thousands of vulnerable people were being contacted out of the blue by firms offering to help them find a loan. But after hefty upfront fees were paid, the loan failed to materialise and people could not get their money back.
An investigation by the OFT found that in 45 per cent of cases, subprime brokers had taken fees averaging £50 to £70 but failed to help customers get a loan, while in a further 36 per cent of instances they had offered consumers a loan that was different to the one they were expecting, often for a smaller amount, a shorter period, or at a much higher APR.Reuse content