Bending over backwards to help borrowers
A lot of Introducer Today readers will already be aware of the recent FCA ruling on credit broking agreements that came into force on 2 January.
It stated that: “Credit broking agreements that are not conducted on a face-to-face basis must include a 14-day cancellation notice and, should a customer apply this right, all payments must be returned within 30 days.”
By introducing this ruling, the FCA is bending over backwards to show that it is on the side of the consumer.
Customers, the FCA says, often “don’t understand that they are dealing with a broker not a lender…there is a lack of consent to paying fees.”
This is the same issue as we’ve been talking about for last few years. We’re asking our brokers to go out and act as educators, but the first message they have to get across is explaining why a broker is part of the solution.
While the great majority of the 119 lenders who belong to the National Association of Commercial Finance Brokers (NACFB) are what we might term “alternative” funders, we have some high street names as well, including Barclays, Lloyds, RBS, NatWest and Santander. They’re all equally valuable sources of finance.
Most of what the FCA is insisting on is simply about transparency, specifically when money is being paid by clients: when, how much, why and to whom. We’re not going to argue against that.
The FCA is also reacting to something we’ve been wary of since the NACFB was founded: unreasonable up front fees.
Of course, the FCA’s ruling (which is explained under section 155 of the Consumer Credit Act) only applies to agreements that are not made face-to-face.
We’ve always felt that a local broker is the most appropriate place to go, not just because geographical local knowledge can be an advantage, but also because the Know Your Customer ethic is enhanced if you have, for instance, seen that the face on the person matches the face on the passport, that the lifestyle matches the bank statements, and so on.
Until the start of the year, a single Terms of Business agreement covered all NACFB members who wanted to use it.
Now this requirement to offer a “cooling off period” for borrowers who haven’t been present at a face-to-face meeting has left us having to offer our members two versions of the Terms of Business, depending on whether they have actually sat down with the borrower.
Adam Tyler is chief executive officer of the National Association of Commercial Finance Brokers.