It’s an unfortunate fact that there are many finance brokers in the UK who will charge you a fee to even apply for a loan. Personally I’ve always found this quite shocking. Although these companies clearly need to make some money in order to operate, charging an up front fee in many cases is ethically and morally wrong – especially given the service most customers are left with.
What do you get for Your Money?
This is the bit that really leaves a sour taste in my mouth… The service you will receive from most of these companies after paying a fee is negligible. The fact of the matter is that there aren’t as many lenders offering loans at the moment. If you apply with a broker they will usually try and match your application up with a suitable lender, but less lenders, means less choice for the broker and therefore less value from your fee. Many brokers won’t even go this far, they’ll simply take your money and then give you a list of lenders you can try and apply with (yes, shockingly, this is absolutely true!), and when you consider that the average up front fee is between £40 and £90, it seems amazing that these people have the audacity to do it. Also be aware that sometimes you are asked to ‘join a loan club’ or something similar – in reality this is just an up front fee with another name.
So picture this; let’s say you apply for a loan through a fee charger and you get accepted for a loan. Great you may say! But in reality, you’ve probably just paid that fee for no reason at all. I can guarantee that you could have gone to another company who doesn’t charge fees and have ended up with the same loan, but without any charge. You may be asking how non fee chargers make their money, and the answer is simple; for every loan they complete, the lender who completes the loan will pay them a certain amount of commission for the customer. Fee chargers get this commission as well, they just happen to also charge you another fee on top!
Watching out for Scams
Although up front fee charging by genuine, licenced UK brokers isn’t illegal (when it’s in line with legislation at least), unfortunately, the UK is currently also riddled with illegal finance scams. It might be a fine line between the two (in my eyes), but the difference with a scam is you have absolutely no chance of getting a loan.
These scams range from online services who simply take a fee from you and do nothing to people who will actually phone you up purporting to be a legitimate finance company when in fact they are not. This type of scam is known as ‘cloning’, often you’ll receive a call from a call centre in a foreign country and the person on the phone will claim to be able to offer you a loan – “All you need to do is pay a £60 application fee and we’ll transfer the money” is something you might hear from these people. They’ll then simply take the money from your account and you’ll hear nothing again. To make the scam seem even more real, these people often steal the identities of legitimate UK companies (including their credit licence and name).
Claiming Back Your Money
If you’re victim to a scam, then there’s little chance of getting your money back, however if you’ve applied through a genuine UK broker, there may be hope. As you may have guessed, most fee charging brokers however, don’t make this as easy as they should do. By law, you, as the customer are entitled to a refund of any fee you pay minus a £5 admin charge (the broker is allowed to retain this) if you don’t get the loan you were seeking within 6 months – you can see full details of this on the OFT’s Website. The broker should instigate this payment automatically for you and issue the refund without you having to lift a finger, the reality however, is quite the opposite. So what’s the best way to get your money back? I would suggest trying the following;
1) If it’s obvious you aren’t going to get your loan then phone the broker and ask them for a refund (even if 6 months haven’t passed).
2) If no refund is issued, write to the broker stating that you are due a refund minus £5 as per Section 155 of the Consumer Credit Act
3) If you still do not hear anything, write to the broker again after the 6 month period.
It’s often hard to get companies to refund your fee and because there’s so much of this going on at the moment, watchdogs like the OFT are too swamped to deal with every single complaint. However, if you persist in hassling the broker, usually they will refund you – after all, they are legally obliged to!