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Borrowers beware! The online trap that will fleece you before you even take out a loan

27 Aug 2014

Scots who want to take out a payday loan are being ripped off by online ‘credit brokers’ before they even get to apply for the loan - according to a new report published today (Wednesday) by Citizens Advice Scotland. 

Credit brokers are the ‘middle men,’ whose role is to put consumers in touch with payday lenders. Over the last year we have seen growing evidence that many brokers do not make it clear that they are not the lender. Rogue brokers often charge unexpected fees for very little service, pass on your personal details to other companies, and refuse to provide refunds when you challenge them. 

Our evidence today shows that we have seen an increase of over 40% of such cases reported to our consumer helpline (03454 040506) in the last year. Most of these involve people on low incomes who are seeking a loan in desperation because they can’t make ends meet, so many of them are pushed into financial crisis by these hidden brokers fee - before they even get to the stage of actually applying for a loan. 


In 2013/14 there were 254 cases of rogue credit brokers reported to Citizens Advice Scotland’s consumer helpline. Analysis of these cases finds the following major issues:

  • Hidden Fees. Most of the brokers had charged a fee for their service, without making this clear. The average fee is around £70, with many customers only finding out when they checked their bank balance later.
  • Passing on personal details: In 71 of these cases, the broker passed the customer’s personal details on to other brokers. In these cases, on average, more than four different brokers took fees costing the consumer an average of £264 with no guarantee of a loan.
  • Refusal to provide refunds: In 55 cases, a consumer was denied a refund despite asking for one within the 14 days allowed under law.
  • Misleading advertising: A review of the main credit broker websites by CAS found that 4 out of 10 did not make it sufficiently clear to consumers that they were a broker service who did not offer direct loans.
  • Links to Payday Lenders. The whole point of credit brokers is they are supposed to be impartial, and to refer you to a lender who suits your circumstances. But in many of the cases we see the broker have links to certain lenders and simply refer clients to these lenders, regardless of whether it suits the customer or not.   

Publishing the report, Citizens Advice Scotland’s Head of Policy Susan McPhee says, 

“It’s bad enough that so many people are falling into debt through the actions of some payday lenders – which of course remains a big issue. But this trend is something on top of that, which is leading people into financial hardship before they even take out the payday loan. 

“A lot of credit brokers provide a legitimate service – searching the market on your behalf to find a lender who suits your circumstances. However, it’s clear from our evidence that many brokers are in fact exploiting consumers, taking money off them without their knowledge. 

“We’ve seen a 42% in Scots coming to our consumer helpline about this issue in the last year – and even more come into their local CAB office in person. The issues we see include hidden fees, mis-selling and unclear terms and conditions. Some brokers will not only exploit you themselves but will then pass your details on to other companies who can take further money from your bank account. 

“Our advice to anyone who is searching online for a payday loan is to be very cautious and read the small print of any website you deal with. Sometimes you are not dealing with a lender but with a broker, who will charge you a fee before they even pass you on to the lender, so you will then have to pay this fee in addition to whatever interest you get on your loan. The only way to avoid this is to read the small print very carefully, and never give your bank details until you know exactly who you are dealing with and what you are getting into. 

“If you think you have unfairly lost money to a broker, then get in touch with us and we will see if we can help you get your money back. You can get our free impartial confidential help at any CAB, or via our consumer helpline 03454 040506.” 

CAS are also making a number of recommendations to legislators and regulators to crack down on these practices. These are listed in the attached report, and below.



1.       The CMA’s recommendation of the creation of a comprehensive and independent price comparison website to allow customers to make comparisons on the cost of a loan should be implemented

2.       The FCA review whether the auction process used by credit brokers meets the needs of consumers or is breaking rules and take action if this is the case

3.       All advertising and web content of a credit broker should explicitly state that they are a broker rather than a lender, the fee that they charge, the refund policy of the company, the address and contact details of the company, and their policies on sharing personal details

4.       The practice of sharing personal details between credit brokers without explicit and informed customer consent should be prohibited, with action taken against brokers by the FCA who do so

5.       Credit brokers should be required to offer refunds within 14 days of the agreement if requested by the consumer, with action taken against brokers who fail to do so.

6.       Lenders should review the relationships they have with lead generators and refuse to take leads from brokers which they find to act in a manner below their own standards of customer service.


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