National broker Loan.co.uk is calling for companies within the secured loan industry to stop “profiteering from customers and charge fair fees”.
Loan.co.uk said that despite thousands of borrowers seeking second charge products many are hit with excessive broker fees on top of lender charges, in some cases adding more than 12% to the total cost.
Paul McGerrigan (pictured), CEO of Loan.co.uk, said: “This is unjustifiable, unfair to customers and has to change. As an industry, we are obliged to give best advice and treat customers fairly.
“Using any kind of broker or price comparison website is perceived by consumers to be the best way to search the market and obtain the best deal, however this trust is sometimes betrayed by those protagonists, who play a role in charging unnecessarily high fees, which are then usually added to the loan amount, costing the customer thousands of pounds more than necessary.
“Of course, the industry has overheads such as legal fees, valuations, consents, marketing, personnel, technology and business costs, so it is completely reasonable to charge a fee, but those who add anything over 6% should look again at their business model and question their reasoning.
“Do they need to charge that much or is it because their customers aren’t questioning it and they can therefore get away with it? – either way are they treating their customers fairly?”
Loan.co.uk has launched its ‘Fair Fees’ campaign in a bid to reduce borrowing costs for customers and increase competition.
McGerrigan explained that Loan.co.uk, which uses an AI (Artificial Intelligence) platform to deliver the best deals to customers in a more efficient manner, was on a mission to drive costs down and increase clarity during the application process.
He added: “The second charge market has doubled in size this year, leaping from £56m in January to £102m by the end of September, making this issue ever-more urgent.
“Secured loans can be the best way for customers to obtain larger sums such as those needed to carry out major home renovation.
“On average, the size of these loans in the UK during September was around £42,000, so when you think some brokers are charging fees up to 12.5%, that amounts to an eye-watering £5,250 average fee which, in my opinion is difficult to justify.
“To make matters worse, some broker websites are unclear what level of fee they charge until the prospective borrower starts the application process, which needs to be addressed.”