Credit Broker vs Lender: Key Differences Explained

If you're searching for finance in the UK—whether it's a personal loan, credit card, or car finance—you'll often come across two key players: credit brokers and lenders. While both are involved in the process of accessing credit, they perform very different roles, especially when it comes to regulation, responsibility, and customer interaction.

Understanding the difference between a credit broker and a lender is crucial not only for consumers, but also for businesses navigating FCA credit broking regulations or considering entering the industry.In this article, we'll clearly define what a credit broker is, what a lender is, and explain the key differences between the two—along with the regulatory implications and why this matters for compliance.

What is a Credit Broker?

A credit broker is a firm or individual that helps connect customers with lenders. They do not lend money themselves but act as an intermediary between the borrower and the lender.

In the UK, credit brokers are regulated by the Financial Conduct Authority (FCA) and must obtain FCA authorisation to operate legally. Their main roles include:

  • Introducing customers to one or more lenders
  • Helping arrange credit agreements
  • Advising on credit products
  • Comparing different finance options on behalf of the customer
  • Operating platforms where consumers can compare credit offers (such as comparison websites)

There are many types of credit brokers—some specialise in personal loans, others in car finance, mortgages, or business funding. Some charge fees; others earn commissions from lenders.

Examples of credit brokers:

  • Online loan comparison platforms
  • Car dealerships arranging finance
  • Independent financial advisers
  • Buy-now-pay-later introducers

What is a Lender?

A lender is a firm that provides credit directly to the consumer. This means they are the source of the loan, credit card, or other finance agreement. Lenders are also regulated by the FCA, but their responsibilities are different from those of a broker.

Lenders take on the financial risk by offering credit. They assess creditworthiness, set interest rates, define repayment terms, and collect repayments from the customer. They are also responsible for affordability checks, lending decisions, and reporting to credit reference agencies.

Examples of lenders:

  • High street banks and building societies
  • Online loan companies
  • Credit card providers
  • Specialist finance firms (e.g., for vehicle or retail finance)

Credit Broker vs Lender: Key Differences

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Why This Difference Matters (Especially for Compliance)

The distinction between a credit broker and a lender is more than technical—it’s a regulatory and legal issue. If your business acts like a lender but is authorised only as a broker, you risk breaching FCA rules and operating without the appropriate permissions.

❗ Key FCA Requirements for Credit Brokers:

  • Must clearly disclose that they are a broker, not a lender
  • Cannot mislead customers about their role
  • Must have the correct permissions on the FCA register
  • Must avoid introducing consumers to unauthorised lenders
  • Must treat customers fairly and provide accurate pre-contract information

In particular, the FCA credit broking regulations 2024 reinforce that customers must understand who they are dealing with. Transparency around the broker-lender relationship is vital.

Common Compliance Mistakes When Acting as a Broker

  1. Not Disclosing Broker Status:
    Brokers who mislead customers into thinking they’re the lender (especially on websites) can be penalised.
  2. Charging Hidden Fees:
    Credit brokers who charge upfront fees without disclosing them clearly fall foul of FCA rules.
  3. Working With Unauthorised Lenders:
    Brokers must only introduce consumers to lenders that are FCA-authorised.
  4. Improper Advertising:
    Marketing materials must not suggest guaranteed approval or misrepresent the broker’s role.

These mistakes can result in FCA enforcement action, fines, or even losing your FCA authorisation.

Benefits of Working With a Credit Broker (From a Consumer Perspective)

For consumers, using a credit broker can offer several advantages:

  • Wider choice: Brokers can compare multiple lenders to find suitable credit options.
  • Faster approval: Brokers can match customers to lenders they’re likely to qualify for.
  • Better rates: Some brokers have access to exclusive rates or pre-approved offers.
  • Specialist help: Brokers can assist consumers with poor credit, specific finance needs, or limited financial knowledge.

However, customers must be careful to choose FCA-authorised credit brokers, and they should always understand whether they’re paying fees or commissions.

Benefits of Being a Credit Broker (For Businesses)

If your business refers customers to lenders—whether online or in person—you may need to be authorised as a credit broker. This model offers flexibility and commercial benefits:

  • Low financial risk (since you're not lending money)
  • Recurring revenue via commissions
  • Broad market appeal (especially for comparison platforms)
  • Regulatory framework designed for intermediaries

But it also means you must stay compliant with FCA credit broking rules, maintain transparent communications, and ensure your customer journey is fully aligned with expectations.

Why Clarity is Critical in Marketing and Customer Communications

Many firms blur the lines between being a broker and a lender in their advertising. This is a major red flag for the FCA.

If you're acting as a broker, you must clearly state:

  • “We are a credit broker, not a lender.”
  • Your FCA reference number.
  • Whether you receive commission from lenders.
  • Any fees the customer must pay (if applicable).

Additionally, make sure your website, terms, emails, and sales scripts consistently represent your role accurately.

Final Thoughts: Stay On the Right Side of Compliance

The difference between a credit broker and a lender is not just a matter of semantics—it affects your legal obligations, risk exposure, and FCA permissions. Misrepresenting your role, even unintentionally, can result in serious compliance breaches.

If you're unsure whether your business activities fall under credit broking, or if you need help staying compliant, it’s essential to seek regulatory guidance. At Authorised Compliance, we help firms navigate FCA credit broking regulations, understand their obligations, and ensure that all customer interactions meet the highest standards.

✅ Let’s Recap

  • A credit broker introduces customers to lenders; a lender provides the funds.
  • Brokers must disclose their role clearly to consumers.
  • FCA rules require authorisation, transparency, and consumer protection.
  • Misleading advertising or incorrect permissions can lead to FCA enforcement.
  • Understanding these differences helps protect your customers—and your business.

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  • What is a lender?
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