At the ASTL, we regularly hold joint events, with our colleagues from FIBA, for a selected group of invitees from around the industry. The events provide an excellent opportunity to discuss current industry issues and best practice in a confidential environment. And so, whilst the individual comments and intimate details from our latest event remain in-house, I think it’s worth reviewing the topics that were discussed.
The first topic is one that been a consistent theme of ours in recent weeks – undisclosed commissions. While lenders operating in the non-regulated market are not required by regulation to disclose any commission that is paid to a broker, recent cases indicate that this is likely to become a legal requirement. Any lender that fails to fully disclose commissions paid to a broker leaves itself open to potential customer redress. It has been suggested that borrowers can potentially bring claims, including redeemed loans, and that there is no limitation on how long files should be kept, with the burden of proof being on the lender and the broker.
The main takeaway from this particular session was that lenders should take the opportunity to speak with their brokers to identify whether all commissions have been disclosed and whether there is evidence to support this. And this is certainly a course of action I would recommend to all lenders.
The second topic, and one that I would like to explore a bit further within this article, was centered on education. The forum gave us a chance to open a discussion around potential options we may have to help improve standards and consistency, and to grow customer confidence in commercial lending.
One option that was discussed was the development of an industry standard qualification to enable brokers to demonstrate a base level of knowledge in the short-term and commercial lending environment. My personal concern with this is that the ability to pass an exam and secure a qualification does not necessarily translate to the provision of structured and appropriate solutions for their clients.
Securing credentials that one can put on a business card may demonstrate a base level of knowledge but, in this market, on the job experience is absolutely crucial to being able to deliver the best customer outcomes. This is one of the reasons why professional advice will remain vital for customers and why I doubt we will ever see technology take the place of our vibrant intermediary sector.
With this in mind, I believe the best route to take is one of continued ‘on the job’ training. Of course, we already have the regulatory requirement for continuing professional development (CPD), but I’m not convinced that CPD is enough on its own. After all, it often only takes attendance of a few webinars or events to meet the minimum CPD threshold and, similar to the limitations of a professional qualification, it’s difficult to see a direct relationship between CPD and delivering a better customer experience.
I think we should be looking beyond CPD to identify a more practical route to the ongoing development of high standards. Many firms already have their own version of this and I’m aware of examples of some very commendable in-house training schemes. The challenge will be whether we can take this approach and replicate it across the industry so that we can create greater consistency and more confidence amongst our customers.
This is just my opinion of course. I know that many interested parties will have a different take on what is required and proclaim good arguments for alternative approaches. The really positive thing here is that education and the delivery of more consistent standards is high on the agenda. In many ways, our joint event with FIBA progressed what may evolve incredibly interesting processes to raise the considerations and identify the challenges and opportunities.
I am confident that by following this process and with an ongoing appetite to co-operate and collaborate, we will be able to identify a suitable and workable route forward.
We are already in a strong position and, thanks to the good works of associations like the ASTL and FIBA, we have nurtured greater standards and an improved reputation for our part of the market. At the ASTL, we will soon commence more detailed activity to help raise awareness and understanding, and to challenge misconceptions about short-term lending. If we continue to progress the conversation about education and consistent standards, we will surely succeed in putting our industry in an even stronger position.
With this in mind, if you do have any ideas or suggestions that you think we should consider, please do get in touch. We have an exciting opportunity to work together for the good of our sector and, most importantly, for the benefits of our customers.