It’s time to end undisclosed commissions

by Digital Media Manager

There is growing noise in the market about the non-disclosure to the end customer of proc fee payments made to intermediaries on non-regulated loans.

At the heart of this is a recent court case that has wide ranging implications for the lending industry. The outcome of the case makes it clear that if a lender has paid a commission to a broker which has not been disclosed to the borrower, that lender is now more at risk of the entire loan being set aside. And where a loan is set aside, this can mean that a lender will have to make a substantial payment to the borrower and, in some cases, the lender might also be required to pay damages.

At the ASTL, we believe this to be a matter of the utmost importance. We are working alongside our colleagues in other trade associations such as FIBA and the NACFB, and we are investigating the introduction of a standard minimum level of ‘lender to consumer’ fee disclosure for all of our members at the earliest stage in the process to ensure protection from retrospective claims in the future.

We think it’s really important that all participants in the market ensure that they don’t leave themselves open to retrospective questioning and claims. The regulator historically has never drawn a line in the sand and so will judge a complaint dating back 10 years, for example, based on today’s rules. This is another issue we feel warrants examination at some point!

Arguably, regulation probably should have encompassed what we know now as non-regulated mortgage business right at the outset in 2004 as this would have created a level playing field from the outset, with no room for ambiguity.

Many mortgage deals in the non-regulated market are already written as if regulated – we now need to agree a consistent approach. However, we should not be suspicious about this approach being rolled out across the whole of the whole of the non-regulated sector. If anything, increasing scrutiny of non-regulated loans serves only as confirmation that these becoming a more integral part of the mortgage lending landscape for many customers and intermediaries. The sector is growing, becoming more mature and, with that, come additional considerations and obligations.

It’s time to end undisclosed commissions. However, we should not mourn their passing, but rather celebrate the growing evolution and importance of specialist finance and short-term mortgage lending. At the ASTL we intend to play a big part in this initiative.

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