Credit broker fees and the APR

A credit broker is a middleman: it finds you a loan or a credit card from a lender rather than lending the money itself. It can be paid in two ways, by commission from the lender it introduces you to, by a fee from you, or by both. Whether that fee shows up in the APR you are quoted depends on what the fee is for and how it is structured, and the two are not always the same thing.

The APR is meant to be the single number that tells you how expensive credit is. It is built from the mandatory charges attached to the agreement, so a broker fee that forms part of that agreement can be inside it. But some fees sit outside the APR calculation altogether, which means the headline rate can look lower than the total you actually pay. A broker can only charge you a fee if it has been explained in writing and you have agreed to it in writing¹.

If a loan never comes through, or the fee was never properly authorised, there is a route to getting it back. The Financial Ombudsman Service handles credit broking complaints, and it is free to use².

What a credit broker is and how it gets paid

A broker sits between you and a lender. It does not lend its own money; it introduces you to a lender that does. That distinction matters, because a broker must make it absolutely clear that it is acting as a credit broker and not a direct lender¹. If that is not clear, the arrangement is not what it should be.

Brokers are typically paid by commission from the lender, by a fee from you, or by a combination of the two. The insurance market shows the same pattern: brokers there are paid by commission, and their professional opinion can be valuable where needs are complicated⁶. In insurance, brokers make their money from commission charged to the insurer and/or fees charged to you, and some earn enough from commission that they may not charge a fee at all⁷.

Credit brokers work the same way. Some are free to use because the lender pays them; others charge for the service. Credit reference services that connect users to credit cards or loans make their money from commissions on the products taken out through their site⁸. A broker that charges a fee for its services is a different model again, and that is the one where the APR question bites.

The practical point for a reader is to establish which model you are dealing with before anything is signed. A broker should tell you whether it is a broker or a lender, its legal name, the fees to pay and when and how, the details of the loan offered, and whether your details might be passed to other companies⁵.

When a broker's fee counts towards the APR

The APR is the annual percentage rate: it tells you how expensive the loan will be, is generally higher than the quoted interest rate, and is meant to show the true cost of the credit⁹. Lenders have to tell you what the APR is before you sign an agreement¹⁰.

The APR is calculated from the total charge for credit, which is the mandatory charges attached to the agreement. Under the consumer credit rules, the APR in relation to an agreement is calculated at the time the credit agreement is made, with all the assumptions used specified¹¹. Where a broker fee forms part of the credit agreement, it is one of the charges that feeds into that calculation, which is why a broker fee can push the APR up.

The APR only includes mandatory charges. Some fees, such as payment protection, late payments or going over the credit limit, may not be included¹². That is the dividing line: charges you must pay to take the credit are in, charges that depend on how you behave afterwards are generally out.

There is a specific wrinkle for second charge business loans. If the credit includes a broker fee, that fee may be excluded in the calculation of the £25,000 floor, but there is no exclusion for an item entering into the total charge for credit¹³. In other words, the fee can be left out of one test while still counting for the other.

The rules also allow a small tolerance in the APR where a period rate of charge applies, working the charges to the nearest whole penny¹⁴. That is a rounding allowance, not a licence to leave fees out.

Fees a broker must tell you about before you apply

Disclosure comes before signature. Lenders have to tell you what the APR is before you sign an agreement¹⁰, and payday lenders must tell you what their annual percentage rate is before you sign a loan agreement¹⁵. All credit card companies have to quote an APR¹⁶.

For brokers specifically, the ombudsman sets out what it expects a broker to have provided: whether it is a broker or a lender, its legal name, the fees to pay and when and how, the details of the loan offered, and whether your details might be passed to other companies⁵. Credit brokers must tell you that they are a credit broker and not a lender².

The regulator has been reviewing how cost disclosure works in consumer credit. Its consultation CP26/15 discusses three areas of the financial promotion rules on cost disclosure: disclosure of the representative APR, mandatory inclusion of a representative example when triggered, and the 51% threshold for determining a representative APR cost disclosure¹⁷.

Where broker fees are not part of the APR

Not every cost attached to borrowing sits inside the APR, and the exclusions are where the headline number can mislead.

On credit cards, the representative APR does not take into account different rates and fees that might apply if you use the card in different ways, such as for balance transfers or cash withdrawals¹⁸. It also does not include fees or charges for late payments, going over your credit limit or returned payments¹⁸. The representative example APR shown in credit card adverts reflects the interest charged on purchases, as opposed to cash advances or balance transfers³.

On mortgages, the APRC only includes the charges and costs set by the bank; expenses from other parties such as estate agents and solicitors are not included¹⁹. So the cost of arranging a mortgage can be split between what the lender's figure captures and what it does not.

Some charges are excluded from the APR by design. Charges made if you pay off the loan early are among the things not included¹⁰. That matters because settling early is exactly when a consumer might expect the quoted rate to reflect what they pay.

There is also a regulatory boundary around who counts as a credit broker at all. A new exemption from the regulated activity of credit broking means most merchants, such as e-commerce websites, are not subject to credit broking regulations when they refer customers to third-party buy now pay later providers²⁰. Where that applies, the disclosure and fee rules that bind a broker do not bite in the same way.

Getting a broker fee back and where to complain

The most common complaints about credit broking are being charged a fee for finding a loan, sometimes without getting a loan at all; fees not refunded when no loan was taken out or offered; and being misled or not correctly informed about the loan's terms or cost⁵.

There are rules about how much a credit broker can charge if a customer does not take out the loan, so even if you have already paid, the position is not necessarily final². The ombudsman will generally ask a credit broker to refund some or all of the fee if the consumer asked for a refund because they did not want the loan, the fees were not made clear, or the consumer did not authorise payment of the fee⁵. Where the broker did not give clear information, it may be told to refund some or all of the fees charged, sometimes with interest⁵. Where fees were unfair or unauthorised, the ombudsman will usually tell the broker to refund the fee, sometimes with interest, refund additional costs incurred, and pay compensation for distress or inconvenience⁵.

Timing matters. Credit brokers should not refuse to refund the fee, or wait 6 months to refund it; any refund should be carried out swiftly if it is clear the consumer would not be taking out a loan⁵.

The process is straightforward. Talk to your lender or broker first, because they need the chance to put things right, then make a formal complaint to them, and after their final response contact the ombudsman if you are still unhappy²¹. Complaining is free². Credit broking complaints are within the ombudsman's remit, and 33 credit broking complaints were opened in Q1 2026/27⁴.

If a broker receives a complaint about something within the scope of the scheme, it must forward the complaint to the lender and inform the consumer that it has done so²². That means the lender is drawn in even where the complaint started with the broker.

The ombudsman will typically want to see a copy of your application, which lenders you were introduced to, how the business made its role and legal name clear, the fee details, compliance with section 155 of the Consumer Credit Act 1974, the work undertaken to find a loan, and whether your details were passed to another company⁵. Keeping those documents makes a complaint easier to pursue.

Is the representative APR the rate I will actually be offered?

No, not always. Consumer credit regulations state that the advertised representative APR must be offered to at least 51% of applications expected to result from the ad³. That leaves a large minority of applicants who may be offered a different rate.

The representative APR is a headline figure for the advert, not a promise to you personally. Your own rate depends on the lender's assessment of your circumstances, and the gap between the advertised rate and what you are offered can be significant.

The wider market shows how wide the range can be. High-cost credit lenders typically charge 450 per cent to 2500 per cent APR²⁴, and rates higher than 1,000 per cent APR are common on payday loans¹⁵. Those are the extremes, but they illustrate why the representative figure on an advert and the rate on your agreement are two different things.

For a broker arrangement, the question to ask is which figure you are being quoted and on what basis. If a broker fee is inside the APR, the number you see already reflects it. If it is outside, the APR understates what you pay, and the fee needs to be added on top when you compare one offer with another.