Lenders must avoid the back-dating of higher rates of interest to the inception of a loan, should a client go into default.
While this back-dating practice is known to happen in the bridging industry, the ASTL has decided that it constitutes unfair treatment of customers. It said lenders that continue to do so risk being expelled from the association.
The new clause, C10.1, states: “For the avoidance of doubt, where the Member has a provision that a higher or non-discounted rate be applied in the event of default, then such rate should only be applied from the date of the default or the date of notification to the client, if later and not back-dated to the initial date of advance of the loan.”
Lenders sign up to the ASTL’s code as a condition of membership. The code covers areas such as Treating Customers Fairly, where all members, regulated or otherwise, must abide by the spirit of the requirements of the Financial Conduct Authority.
It also covers the way any complaints should be handled and dictates the need for transparency in the way that fees are charged.
Benson Hersch (pictured), chief executive of the ASTL, said: “The ASTL sets very high standards. This is to provide brokers with the assurance that their clients will be benefit from high standards of ethics and transparency when dealing with an ASTL member.
“This includes not issuing terms nor charging fees where the lender does not reasonably expect to provide finance; bringing to the customer’s attention all costs and fees to be charged and treating both customers and all other third parties at all times fairly and courteously.
“The new clause in our code of conduct just helps to eliminate any thought of bad practice and raise our standards still higher. Any lender found not abiding by these will risk being expelled from the association.”