THERE has been a dramatic increase in consumer credit over the last 30 years - and by far the greatest area is house purchases. The Consumer Credit Act 1974 was passed to protect consumers from unscrupulous lenders and undesirable business practices in small areas of the credit industry and is of particular value to people contemplating what is probably the single most expensive purchase they will ever make - buying a house.

Anyone who offers a credit brokerage service (i.e introduces borrowers to a potential source of lending) is required to hold a Consumer Credit Licence. An unlicensed trader who engages in any activity for which a licence is required commits a criminal offence, for which the maximum penalty is an unlimited fine and/or two years' imprisonment. The licensing system ensures the credit industry is kept under close scrutiny. In addition, if the broker does not have a licence, the lender may not be able to legally enforce the agreement.

Section 155 of the Consumer Credit Act is of particular importance to anyone using the services of a credit broker to find a source for financing the purchase of a house. It was introduced as a result of abuses which came to light. Some brokers had developed the practice of charging prospective borrowers large advance fees and then making little or no effort to obtain the required loan. Alternatively when loans were offered they were often so expensive that few potential borrowers found them acceptable. Section 155 was, therefore, introduced to ensure that the broker would receive only a nominal fee if he was unable to obtain credit or hire facilities for individual at a price they are prepared to pay.

Section 155 allows a credit broker to charge no more than £5 for his services if the consumer does not enter into a relevant agreement within six months of an introduction to a prospective source of credit or hire. If the broker has already charged more than £5 for his services, the excess must be refunded.

The reason why a consumer does not enter into a credit agreement does not matter and the credit broker may not "contract out" of the provisions of the Act. If the consumer decides not to enter an agreement the broker is entitled to £5.

If you have a problem with brokerage fees, or for advice on this or any other consumer credit matter, contact York Trading Standards at 9 St Leonard's Place or telephone 01904 551562. Our fax number is 01904 551511 and our email address is trading.standards@york.gov.uk