Why You Should Stay Away From Payday Loan Brokers

Brokers have lately become known for their malpractices in the payday loans industry. A lot of borrowers have claimed that the brokers were charging very high fees and were selling their confidential details to other companies. Many cases were registered stating that the brokers were accessing the bank accounts of the borrowers and withdrawing money regularly. All of these malpractices have brought the attention of the FCA over this matter and, FCA has taken urgent steps to tackle these unfair means practiced by the brokers.

It has been stated that brokers have made more than a million attempts in a single month to rip the bank accounts of the poor borrowers. The brokers charge a fee of anywhere between 50 to 80 pounds with a promise to find a loan and best deals for the borrower. They then have been reported to share the confidential finance details of the borrowers with 200 or more lending companies or loan matching services, which also attempted to rip off the borrower.

According to the FCA, around seven brokers have been banned from taking on any more clients, and three more brokers are being taken action on. Also, NatWest stated in October 2014 that a lot of vulnerable and affected borrowers were reporting the alleged theft of their money from their bank accounts and claimed that money was being regularly withdrawn.

The new rules from the FCA came into force from the month of January, 2015. These new regulations are meant to block the lack of clear content on such broker websites what are luring borrowers into paying heavy fees without their consent, even without informing them. This was a welcome but yet a sudden step from the FCA, which FCA cleared by saying that the regulations have been created without any consultation because no more delay could be done for the benefit of the customers, and anymore delay would further increase the number of such cases. The FCA also added that the enforcement of these regulations alone are insufficient in protecting the borrowers from such malpractices in the market, as it is on the part of the people to stay aware of such things and avoid themselves from getting into such situations. As long as possible, borrowers must never hire brokers and instead go for payday loans no brokers offered directly by legitimate lenders.

The new regulations will block the payday loan brokers from taking any fees from the borrowers and also from asking for their bank details, unless they follow the new rules. The new rules binds the brokers to keep complete transparency with their customers regarding the process; they must also let the customers know pre-hand about the amount of fee and the date when the fee is payable.

The new regulations are as follows-

·         When advertising or dealing with a customer and in all types of communications, the brokers must always use their legal name the way it is registered in the Financial Services Register.

·         They must also state in the ads and communications that they are a payday loans broker and not the direct lender.

·         The fees charged by the brokers has not been capped in this regulation, but they are now required to make it clear to their clients when and in what cases will the fee be payable, and how much and when will the feel be charged.

·         The brokers who charge fees to the borrowers will be required to report to the FCA every quarter for submitting details about their websites.

·         If the customers hire a broker online or through phone, they can cancel the deal within 14 days and get their fee refunded.

The regulations set by the FCA against the brokers is the latest happening in the payday industry after the regulation of the lenders themselves. After the new rules for the brokers came into effect, one of the rules also stated that the payday loan brokers cannot charge more than 0.8% interest per day. This move from the FCA is expected to close down at least 4 out of 5 brokers, who have been charging a ton from their poor customers. The reason behind these implementations also included the fact that of all the consumer credit complaints received by the FCA, more than 40% of them were regarding the brokers.

Relevant intelligence information has also reached the FCA from the consumer groups and other people who are being approached by people who have been reporting one or more brokers for taking money from their accounts regularly.

Many borrowers who used brokers and payday loan matching services were asked to share their bank details even before they were guaranteed a payday loan. This mostly resulted into regular unknown withdrawals from their bank accounts by the brokers and other such fake firms. Many customers also reported that they had been receiving threat calls from supposed collectors who were forcing them to pay back the debt that they never owed. Hence it is advised that the borrowers must go for payday loans no brokers directly from the lenders and avoid brokers always.

This shows how vulnerable the payday industry is and how the brokers use malpractices to earn money and cause the borrowers a lot of financial troubles. Thus going to a broker for a loan to solve your financial problems can lead you to a bigger financial crisis in case the broker uses such malpractices in your case.

Hence, it is necessary the borrowers must always be alert, aware and educated about such malpractices. You must never ever go to a broker or a loan matching firm for a payday loan. You can easily get payday loans no brokers from direct lenders, and at better interest rates, without having to pay extra fees to any brokers. Borrowers must realise that by hiring a broker, they are not only losing an extra chunk on money, but are also risking their financial details, whereas they can easily apply and get a payday loan approved in no time directly from the lenders.

So make sure you avoid brokers and the fake websites. Always do a thorough research before applying on a website, and to be on the safe side, always apply for loans at well-known lenders.