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.
In situations 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 Association of Short-Term Lenders (ASTL), we believe this to be a matter of the utmost importance.
We are working alongside our colleagues in other trade associations such as Financial Intermediary and Broker Association (FIBA) and the National Association of Commercial Finance Brokers (NACFB).
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.
Need for consistency
Arguably, regulation probably should have encompassed what we know now as non-regulated mortgage business from the outset in 2004, as this would have created a level playing field 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 non-regulated sector.
If anything, increasing scrutiny of non-regulated loans serves only as confirmation that these are 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 comes 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.