Your Rights When Using A Credit Broker

Those adverts and come-ons offering to find you the loan you need at the price you can afford are tempting, aren't they? Credit brokers are companies that will work to find you the loan that you need to start your new business, pay off your debts, buy your new house or car, or finance major home improvements - in other words, for nearly anything that you might borrow money for. In return, you pay them a fee for their services in hunting down and introducing you to loan sources.

Generally, the consumer seeking a loan pays a fee - usually around $50 (50 pounds) - and can expect to be offered a loan from a credit or finance company. In July, the Office of Fair Trading reminded consumers that they have the right to reject any loan offer that is not to their liking, and receive a refund of all but $5 (five pounds) of their fee paid.

Said Penny Boys, Executive Director of the Office of Fair Trading, "The law on brokerage fees is quite clear. If a consumer does not accept the credit offered, no matter what the reason, they are entitled to a refund less the $5. Consumers entering into a credit agreement need to be aware of their rights."

Does that mean you should not use a credit broker? Of course not! Credit brokers can be enormously helpful in finding good terms on loans for people who have non-status credit, or have pending judgments standing against them. Because they regularly do business with a wide variety of lenders, they have established relationships and know where and what loans may be available to suit your situation.

If you do choose to seek a loan through a credit broker, though, you should be aware of your rights.

1. You have a right to a refund of your credit fee, less $5 if the credit brokerage does not make an acceptable loan offer to you within six months of accepting your business.

2. Section 155 of the Consumer Credit Act of 1974 applies to consumer loans of $25,000 or less. It states specifically that a credit broker can only charge $5 for its services if a consumer doesn't enter into a loan agreement within six months of being introduced to a creditor.

3. If the credit brokerage refuses to refund your money, they are subject to losing their brokers' license.

The OFT revisited the issue of credit brokers in July because an investigation had turned up cases of unscrupulous brokers targeting disadvantaged consumers. In a typical arrangement, the broker would tell the consumer that they had found a loan for them, collect the brokerage fee, and only then tell the consumer that the credit provider would only lend a smaller amount than the consumer sought, or that the lender required a guarantor for the loan.

In such a case, according to section 155, the consumer is under no obligation to accept the loan. You have the right to reject any loan offer that is not to your liking, and receive a refund of the brokerage fee, minus the $5 that the brokerage is entitled to ask for.