A way ahead for Specialist Property Finance June 2021

Increased regulatory oversight in 2021 will affect us all perhaps more than just the introduction of the changes to Fee Disclosure from the FCA that came into force at the end of January. The form of its likely implementation across Specialist Property Finance is now a strong topic of discussion as we aim to get ahead of the likely consequences, by proactively looking at areas which need addressing and implement those changes ourselves before having conditions thrust upon us fully.

For example, the sector would definitely benefit from an impartial complaint reporting process. Currently, the industry has no formal central point to report dubious practice in any aspect of the industry. In the absence of a dedicated facility in the bridging channel, FIBA and others do already provide an informal resource to respond to complaints from members who have issues with the way either a broker and lender or importantly their customers have been treated.

While the sector has significantly improved its standing and we have a voluntary Code of Professional Ethics and Standards, a formal procedure should be put in place where issues can be recognised and complaints from advisers and indeed customers about difficult experiences can be aired and dealt with. FIBA has a working template which, with the cooperation of the whole sector, is more than capable of providing such an independent and impartial mechanism.

The value of expanding this initiative would provide further evidence that the bridging market has the ability to prepare for the future and, in so doing so, would also increase transparency and confidence in the bridging market as a whole. It would be a very positive demonstration to those who could eventually influence the way in which we have to conduct our industry.

Regulation is creeping forward, with the aforementioned disclosure changes as one example. As an example we all now take the Senior Managers & Certification Regime, as part of all our normal reporting routines. It didn’t seem that long ago that we were providing significant support to our members in making the transition.

More recently the Financial Conduct Authority has started asking brokers about how they use their regulatory permissions as they take a wider view of the Credit Market. Initially this pilot is to just 300 authorised credit broking firms of the 32,000 that hold permissions for credit broking. Once the pilot is complete the survey will be sent by the regulator to all firms with those permissions. There is further comment in this narrative about the use of current regulatory permissions, but the selection for the pilot has been made to include a broad range of firms holding credit broking permissions looking at regulated transactions both current and projected.

Following on from this, there are some proposals in the latest FCA Quarterly Consultation paper about new powers to cancel or vary permissions under the FCA’s use it or lose it initiative.  This is something that was expected following previous HM Treasury publications.

It looks like this will focus on firms that have not used their regulatory permissions to earn any income for the last 12 months.  This is to reduce the risk of firms having a permission to carry out regulated financial services purely to add credibility to their unregulated activities.

We will all need to keep an eye on this, but I believe this will be of most interest to consumer credit firms who may hold permissions only for the occasional regulated transaction.  It will be a case of emphasising to these firms the importance of engaging with any communications from the FCA even if they rarely do regulated business.

This all leads to the consideration of possible industry training and the implementation of an industry standard for all aspects of commercial lending. These discussions are already taking place with specialist property finance industry colleagues on the topic of support for an independent source to consider the issues from our members and their customers. We are heading in the right direction, but it is up to all of us to bring about the changes the sector needs to be best prepared for the possibility of a more regulated environment.