The Mortgage Credit Directive hails a new era of regulation. I believe that it will however only be the start of what is to come – which will be a fully regulated market for all loans and for all lenders and introducers.
Ultimately we all lend money, through one form or another, to an end consumer, so it does make sense that each of those transactions, and each of the people involved in making it, are governed by the same doctrines and rules. It is how we get there and how this is carried out that will be interesting.
I completely subscribe to the principles and the rules of regulation. Even though the majority of our business has not been regulated, it is a personal principle that we always adhere to Treating Customers Fairly, which means that we have lived by the principles of regulation even while not regulated.
I believe that it is these TCF principles that the FCA and the EU are trying to capture in legislation. As a result we are rapidly moving to an environment where to be taken seriously you need to be regulated.
The transitional period will have implications however, for example, Brightstar has a regulated arm but part of our business remains unregulated. Our purpose is purely to support brokers with our expertise and wide market knowledge of the specialist lending market in all of its forms. It is clear however that it is still the broker that provides the advice; we are just there to help them in areas that they are less familiar with.
If we become fully regulated it may well confuse the issue and raise the question of who is giving the advice and on whose liability is the client taking out a particular loan, even though we carry on operating in exactly the same way that we have done for the past four years.
Regulation, in the form of authorisation, is also likely to come to all of the intermediary community. It is rapidly becoming the case that someone cannot even introduce business unless they are authorised. The risk to the authorised person providing advice to a client on that basis is rapidly becoming too high, so even if an introduction is made in good faith the broker runs too large a risk to accept it.
Where lenders are concerned, full regulation, may well mean that it takes a lender a little longer to come to market – but this is no bad thing. In the bridging space particularly, it is possible for some lenders to come to market in as little as six months which is an incredibly short time, while others operate completely below the radar.
Regulation is inevitable, and in its purest form it is a good thing as its principles of protecting the customer are sound. It should not be a barrier to market however, so as it becomes more commonplace and rolls out to cover that whole market there will be a need to look at the cost and the administrative burden so that small firms are not unfairly disadvantaged. One thing is for sure, regulation is coming and the market two or three years from now is likely to be a very different one.