Cracking down on misleading credit brokers

Feb 17th '23

When Dave’s employer reduced his hours, it soon became harder to pay his bills, particularly his energy bills. With his low income, his bank wouldn’t extend his overdraft or give him a loan.


Struggling, Dave went online to see if he could get a loan. He was amazed at how many online credit brokers were offering to provide quick loans with no credit checks.


But Dave had got into debt when he was younger and wanted to be sure these ads were legitimate offers. So, he contacted us to check a few things:


  • ‘No credit check needed’

The Financial Conduct Authority (FCA) told Dave that the rules are very clear: firms can’t make these kinds of statements if credit checks are made as part of the loan application. Even if the firm is only acting as a broker and won’t make a credit check itself, implying that the lender won’t check applicants’ credit status probably goes against FCA rules. Despite this, many firms use phrases like ‘Fast cash now with no credit check’, ‘Pre-approved loans’ or ‘No credit check payday loans’, leading people to think they’re automatically approved for a loan they may actually be turned down for.


  • ‘Quick cash’ and ‘approved instantly’

There are no ‘immediate’ loans – this would depend on whether Dave’s loan application was successful. FCA rules mean lenders have to carry out creditworthiness checks unless the applicant is borrowing under £50. Lenders also have to take into account the results of affordability checks. If these ads imply that credit is available to people who their access to credit is restricted, then the ads must also include the representative APR.


  • ‘Loans approved by the FCA’

The FCA does not approve loans.  While financial services firms have to get authorisationto carry out specific activities, they can’t imply that the FCA endorse or approve their services. The rules are clear that firms must use standard wording when they refer to being regulated by the FCA in their promotions. Claims like ‘Rest assured we’re fully authorised by the FCA’, can imply they endorse a firm or its products. This would be misleading and so would go against the rules.


  • No risk warnings

Some credit brokers and lenders offer high-cost short-term credit without giving any warning of the potential risks of taking out these types of loans. FCA rules are clear – firms offering this type of loan must prominently show a risk warning that late repayment can cause serious money problems. This warning must also point consumers to should they require any help. It’s often more likely to be consumers with the fewest options who take out these types of loans, so the risk warning is an important reminder of the potential implications. If firms don’t include risk warnings in financial promotions when they should, they are going against the rules.


Dave hadn’t heard of MoneyHelper before. He decided not to apply for a loan and give them a call instead.


These are just some of the most common misleading phrases and concerns we see in these types of ads. When they do, the FCA use a range of tools. These include getting the firm to change wording so that it’s accurate, fair and clear or getting the firm that approved or published the ad to remove it. In the most serious cases, they have powers to ban a promotion or ad.


  • Read:

Credit broking firms: key rules.


Source: FCA


Need some promotional advice? If you want to understand more about how to make sure your marketing materials meet FCA standards, please click here.



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