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Some money brokers are charging membership fees or broking fees for loans as soon as they have your bank details- even if you’ve not yet had a loan. Here’s how to find out if you’ve been affected and what you can do.

Why Does This Happen?

Picture the scene. You need a loan so you type into a search engine ‘cash loans’ or something similar. A range of sites appear and you enter your details, including bank details thinking that you’re applying for a loan. What actually happens is that you’re giving your details to a loan broker, who could potentially who could then charge you a fee of up to £70 in brokerage or membership fees. What’s more, they could pass your details on to other brokers, who could charge you for their brokerage and membership fees, and this is before you’ve even been approved for a loan in the first place.

What Are Brokers?

Loan brokers are not the same as credit lenders. Brokers offer to help customers find the best loan for them on their behalf, which is why they could charge a membership or brokerage fees.

Loan brokers take your details and contact credit lenders on your behalf. They are not lenders themselves.

There has been an increase in the number of people complaining about brokers and their fees, leading to Natwest bank to warn customers off using them.

How Do I Know Who’s a Broker and Who’s A Lender?

When looking for loan options online, read the website carefully. Make sure you read the ‘About Us’ sections and the sections which state what your details will be used for. If the website doesn’t say what your details will be used for then don’t enter your details.

Lenders will usually use words like ‘direct’ or will say on the site they don’t use a broker.

Not All Brokers Charge Fees

Not all brokers charge fees, however. At Provident, we work with brokers but we only pay them a commission per signed up customer, so the customer does not pay anything extra for this service. This is to ensure that customers understand the full costs of their loans, upfront.

How Do I Know Who’s a Broker and Who’s A Lender?

When looking for loan options online, read the website carefully. Make sure you read the ‘About Us’ sections and the sections which state what your details will be used for. If the website doesn’t say what your details will be used for then don’t enter your details.

Lenders will usually use words like ‘direct’ or will say on the site they don’t use a broker.

What Are My Rights Should This Happen?

If you have been charged brokerage charges but haven’t been accepted for a loan, you should firstly contact the brokerage company to complain. If you are still unhappy, you could contact the Financial Ombudsman Service (FOS) who will be able to give you more information and even investigate your complaint.

Complaint templates can be found here.

How Is Data Protection Affected?

At some point during the loan application process, you will tick boxes agreeing for your details to be used for the purposes of getting a loan.

However, your data should be treated in line with the Data Protection Act.

FCA Regulations

According to FCA regulations, which can be read in full here, firms cannot take fees from a customer’s bank account without permission, or unfairly pass on a customer’s personal data to another firm. What’s more, the websites and marketing materials used to promote the business, must not be misleading (i.e. hide the fact that they’re a broker and not a lender).

Finally, if you have not received a loan within six months of your application to the brokerage, you are entitled to a refund. The refund will have £5 deducted for administration fees. The brokerage must promptly respond to any request for a refund.