Credit brokers who demand upfront fees for loans they will never arrange are set to be shut down in a crackdown by the Office of Fair Trading (OFT) as part of their response to a complaint that was made by the Citizens Advice Bureau.
The charity reported that several dishonest firms had been cold calling potential customers, offering loans in exchange for upfront fees. Many of these loans never materialised as customers were not suitable, or the firms simply didn’t get around to arranging them. A new ruling from the OFT will make it compulsory for firms to refund in full fees paid for a loan that is never agreed.
Chief executive of the OFT, John Fingleton explained, “Our evidence suggests some businesses are deliberately taking people’s money upfront with no realistic expectation of finding them the type of loan they need.” “We will continue to take robust enforcement action against businesses using unfair or improper business practices and we are providing new guidance making very clear the kind of behaviour we expect from the industry.”
The OFT also plan on implementing new rules at the same time which will prevent debt management firms from making misleading claims in their adverts, and will also prevent the charging of expensive fees up front, poor advice or posing as charities. The trade body will also petition the government and ask them to outlaw the charging of fees to arrange a loan completely.