FLA publishes supplementary briefing on OFT's Guidance
Richard Humphreys has assisted the FLA in producing the supplemental briefing, published 19 September 2012, on the OFT's Guidance for Credit Brokers and Intermediaries.
The Guidance was published in November 2011 and sets out the OFT's expectations for fair business practices on the part of credit brokers and intermediaries when offering credit to potential or actual borrowers.
The supplemental briefing is non-binding and is intended to help FLA members who use brokers and intermediaries to comply with the Guidance. It provides relevant, practical examples of how the Guidance might be implemented effectively.
Although the Guidance is specifically directed at credit brokers and intermediaries, financers also have responsibilities to take "reasonable steps" to satisfy themselves that the credit brokers and intermediaries they work with are not engaging in unfair business practices or acting unlawfully and that they are appropriately licensed.
Financers will find it helpful to familiarise themselves with the Guidance through the Briefing as they:
- should not trade with credit brokers and intermediaries who are not following the Guidance; and
- might be asked to assist intermediaries in complying with the Guidance.
The briefing is set out as follows:
- Section 1 – introduction: summarises the purpose of the Guidance and the Briefing
- Section 2 – definitions of credit brokers and intermediaries: sets out an illustrative list of examples of "credit brokers", the definition of "credit intermediaries" and what firms might be classed as both
- Section 3 – scope of the OFT Guidance: sets out the obligations placed on credit brokers and intermediaries in the Guidance, as well as relevant wider legal duties. This section also sets out the responsibilities that the Guidance places on lenders
- Section 4 – disclosing status to borrowers: sets out the information credit brokers and intermediaries may need to disclose to borrowers in order to satisfy the Guidance and provides some practical suggestions on how this might be done
- Section 5 – disclosing the existence of commission to borrowers: sets out the expectation in the Guidance that the existence of commission should be disclosed to the extent that it could affect independence and give rise to a conflict of interest. This section includes useful scenarios demonstrating when the need for disclosure might be triggered and examples of how this could be done
- Section 6 – disclosing the amount of commission to borrowers: sets out what constitutes a "request" from a borrower, how the amount of commission should be calculated and how this should be communicated to the borrower
- Section 7 – complaints handling briefly: summarises the FSA's rules on how complaints must be managed
- Section 8 – regulatory compliance: sets out the OFT's expectation on compliance. It is important to note that the Guidance expects that licensed businesses should have begun immediately to work towards full compliance.