Credit brokerage is not a phenomenon of modern times, but credit brokerage already existed in the Roman Empire. The popular term for credit brokerage is the commercial brokerage of loans to prospective creditors. The mediation of loans is legally defined in many countries. The loan brokerage is carried out by a credit broker who receives a fee or commission for this.
In the meantime, however, there are also various portals on the Internet that offer credit brokerage. These work with banks affiliated with them, most of which are direct banks. They have standardized loans in their offer, whereby the customer receives an overview of the conditions offered, in order to then decide on a provider. The term “social lending” is used by the financial world to refer to a special credit broker that brings investors and loan seekers together.
This form is also called peer-to-peer credit because no bank is involved. Investors are mostly private individuals who hope to receive a higher return on their capital from lending than if it is based on the savings book. Legislation has legally established the approval of credit intermediaries in several countries. In order to receive approval, the loan broker must provide proof of expertise and submit liability insurance. He must not have committed a criminal offense or be a member of any association.
The rights and obligations of credit intermediaries are usually regulated by law. Remuneration is also regulated. The credit intermediary receives a commission that either the borrower or the lender pays. This commission is usually a one-off payment after the loan agreement has been concluded. If for any reason no contract is concluded, the loan broker may not request a commission. However, contracts are also permitted in some countries in which the credit intermediary is promised a non-performance-based commission. The European Union laid down the legal framework for the provision of credit to consumers in the Consumer Credit Directive 2008/48 / EC in 2008.
Credit intermediaries need commercial approval
A credit intermediary must be approved in Germany by a competent authority such as the trade inspectorate. To do this, he must demonstrate the required reliability to carry out his work and show intact financial relationships. So he needs a commercial finance operation with a long-term activity and the intention to make profits over a long period of time. In doing so, he must comply with the legal regulations for brokers and financial service providers, which contain some special provisions.
According to § 655a BGB, credit can only be brokered if the contract has been drawn up in writing and arranged for payment. The commission payment is only made when the contract has been legally signed by both parties. The deadline for revocation by the borrower must also have passed. No broker may request payments other than the commission for the loan brokerage unless he can justify and substantiate them individually. A flat rate is not permitted. When arranging credit, the service provider must comply with the information obligation stipulated in the contract in accordance with Art. 247 §13 EGBGB.
The written requirements for credit brokerage must also be complied with, otherwise the contract will become invalid. This regulates the regulations on the reimbursement of expenses of the credit intermediary according to §652 Abs. 2 BGB and prefers the rights of the consumers. These regulations must not be avoided in individual cases. The special protection applies only to consumers, but not through companies of all, freelancers or self-employed who want to use a loan for business. These rules have been created to ensure transparency for the borrower. There are still more extensive protective measures for consumers.
If a loan contract is concluded for a home visit or the so-called distance selling, the consumer has a right of withdrawal according to §§ 312, 312b BGB. If the borrower is caught up in a fraudulent deception by the credit intermediary, the borrower can contest the conclusion of the contract. Any behavior that serves to force the conclusion of a contract by exploiting the business inexperience of the consumer is deemed to be deception. Advance payments of all kinds are also not permitted. Until the year 2000, credit brokers mostly brokered installment loans to households, which generally had poor credit ratings. Loans to commercial borrowers or for construction finance were rather rare.
Credit agencies are subject to detailed legislation
In 1990 a new consumer credit law was enacted, which precisely regulates the rules for credit brokerage to consumers. 2002 about the BGB the regulations in §§ 15-17 VerbrKrG. However, the Internet completely changed the credit market by becoming a new contact platform for brokering all types of credit. In addition, a completely new group of credit intermediaries emerged.
They do so-called ‘social lending’. Private lenders and loan seekers meet on these Internet portals. Many of these users of ‘social lending’ are angry or frustrated bank customers. In the meantime, there are even similar platforms for granting cheap building loans or property buyers. These portals have specialized in this customer branch and the market for ‘social lendings’ is constantly growing. There are various reasons why a consumer needs a larger amount of money in the short term. Sometimes, however, people go into a financial predicament lightly and lose their creditworthiness, making them victims of dubious credit intermediaries.
However, dubious intermediaries can often be identified in advance, as they mostly want to broker loans without any checks or guarantees. There are loans without an examination by the Credit Bureau, but not without any examination of the finances. Often, dubious credit brokers require advance payments or reimbursement of costs before the contract is signed. This behavior is often not legal. Credit brokerage in most European countries is subject to very strict regulations, which are primarily intended to protect the rights of borrowers. Even today, it is advisable not to simply trust and sign the first best loan brokers.
Anyone interested in credit should first look for suitable offers on the Internet. There are many Internet portals that are equipped with a loan calculator. This means that every loan applicant can first check whether they can also deduct the desired loan amount through a monthly installment. There are many different types of credit that cause different borrowing costs. A good credit broker helps the client through this jungle in an advisory capacity. The credit agencies should also include several comparable offers so that the customer can choose.