According to the story related by Henry of Huntingdon, King Cnut (Canute) set his throne by the shore of the sea and commanded the tide to halt. Of course it didn’t. He did this, not out of a misguided sense of omnipotence, but to show his fawning courtiers that even a mighty King is powerless against the forces of nature. So is the mortgage industry powerless against the inevitable rise of regulation?
The Financial Conduct Authority (FCA) handbook currently consists of 8,808 pages in print. There are no less than 2,400 html pages on the FCA website. I never thought of the FCA as representing an ecological threat, but trees must be trembling at the thought of so many pages being printed.
The sheer volume and complexity of regulation has put off many firms from obtaining permissions to engage in regulated credit activities. A significant number of firms decided not to apply for interim permissions. Of those who did apply, a large number have decided to allow their interim permissions to lapse or be cancelled.
The perceived cost of individual authorisation has put off many people. More than two-thirds of intermediaries have decided that becoming appointed representatives is the better (and cheaper) route. Others have left the industry altogether. Where this has weeded out some ‘bad eggs’ this is positive, but in many cases, this has meant that the mortgage industry has lost valuable experience and knowledge.
As with many things, regulation has good and bad aspects. In many respects, the objects of regulation are good business practice. The concept of Treating Customers Fairly is now embedded in the DNA of responsible lenders and intermediaries. The National Association of Commercial Finance Brokers (NACFB) has updated its code of conduct. As CEO Adam Tyler recently stated “we’ve had to write an entire code of conduct specifically for unregulated brokers. The effect is that we will monitor unregulated brokers just as closely as the FCA would, meaning that clients can have exactly the same level of confidence approaching any one of our brokers.”
Rob Jupp, chairman of the Association of Bridging Professionals and CEO of Brightstar, has tirelessly promoted the need for professionalism and good practice. The ASTL applauds these approaches, which resonate with our own code of conduct.
Regulated bridging loans probably account for less than a third of total bridging advances, so there is plenty of quality unregulated business out there. Although there are signs of the pace of growth slowing, the bridging market remains healthy and diverse, with lenders finding niche areas where their offerings attract borrowers.
Whatever the future holds, regulation, whether by the FCA, trade associations or simply the requirements of the market; is here to stay. The challenge is to accept it and get your feet wet; and not be swept away by the tide.