Consumer credit and premium rate services

Consumer credit services include payday loans and credit broking. Payday lenders provide short term financial loans, whilst credit brokers often link somebody looking for short term finance with a company willing to provide it. Credit broking services normally involve a fee payable by the consumer. Where an agreement for credit is not agreed within six months, and a fee has been charged, the consumer is entitled to ask for a refund if they have paid more than £5 to the broker.

Our guidance has been drawn up following close working with another regulator, the Financial Conduct Authority (FCA). The FCA have responsibility for consumer credit services and are introducing new rules for credit brokers on fees and transparency coming into force on 2nd January 2015.

Although such services fall within the wider scope of financial services, a number of credit broking services operate within the premium rate services (PRS) industry. We saw the FCA’s changes as an important opportunity to review our existing conditions (see our review of prior permission conditions on consumer credit services operating on PRS consultation) and to develop new guidance aligned with the new FCA rules.

Like PhonepayPlus’ Code of Practice, the new FCA rules are designed to support consumers’ rights and address activities in the sector that could put consumers at risk.

Our final statement outlines some key points for credit brokers operating by PRS. Key changes include:
- the scaling back of the prior permission requirement for consumer credit services during the remaining period of time in which our 12th Code of Practice is in force; and,
- new guidance which sets out requirements on providers of PRS consumer credit services in order to be compliant with our Code of Practice and the FCA’s rules and guidance.

We also spell out what consumers can expect from a PRS consumer credit service:
- clear information about who the organisation they are dealing with is;
- what fees will be payable and when; and,
- clear advertising that the organisation they are dealing with is a broker, and not the final lender in their application process.  

Our aim is to empower consumers to make informed choices by providing them with as much information about who they are dealing with and the costs involved in accessing a service. More widely this helps support a healthy PRS market which consumers trust.

To read our final statement on the review of prior permission conditions for consumer credit services operating on premium rate, please click here.

To read our service-specific guidance note on consumer credit, please click here (PDF file opening in a new tab) 

For further information on the new rules being introduced by the FCA on credit broking, please click here.