FCA in support of self-imposed bridging qualification

FCA in support of self-imposed bridging qualification




The Financial Conduct Authority has confirmed they'd be very happy with a self-imposed bridging qualification....

The Financial Conduct Authority has confirmed they'd be very happy with a self-imposed bridging qualification.

During the ASTL (Association of Short Term Lenders) conference, Lynda Blackwell, keynote speaker on behalf of the Financial Conduct Authority (FCA) confirmed the regulator would be content with a self-imposed bridging qualification.

The ASTL conference was held on the 16th of September 2014 at Painter's Hall, London where Lynda Blackwell’s speech established the overarching theme of the conference: the ongoing process to regulate bridging. Lynda took to the stage right after ASTL's CEO Benson Hersch announced that by a poll it found that 70 per cent of lenders think regulation will have "a positive or no effect" on the industry.
 
When B&C asked about the FCA's position on the idea of a self-imposed bridging qualification, Lynda said: “Bridging finance did not exist in the shape it exists today. It was first created around 2004 and this is something for us to think about.”

She added: “It would sound fantastic. We're not against the industry doing anything to raise standards. It would be great if the industry would do that.”
 
Despite Lynda admitting there is “not much data” on bridging available, some reports the FCA got from “trade press” pointed towards instances of “extortionate fees” and “unfair treatment of consumers”. Lynda claimed that the apparent escalated growth of the market since the April 1st implementation of the MMR has given the FCA particular cause for concern.

She conveyed a view by the regulator that alternative finance is in urgent need of state control because of “unscrupulous lenders” who target consumers who lack “affordability” and “credible exit strategies”.
 
She went on to say that some 100 mortgage lenders active now are sharing a market that is 50 per cent smaller and therefore more competitive than before the crisis. As a result, “the pressure is on small lenders to focus on riskier sectors and products.”
 
All the above-mentioned factors combined with the Government's ample stimulus funding for the economy produced “a number of conduct risks” for the FCA. What most attracts the watchdog's attention is “funding for debt consolidation” and “credit repairs”.

Lynda noted recent trends in credit lending, with an emphasis on diminished home ownership and a market increasingly dominated by buy-to-let tenures. She stated that as credit became available to those “who couldn't previously access a mortgage, including the credit-impaired, lower income and highly indebted” consumers, this marked a shift in appetite towards higher-risk lending. The result of the change in conditions gave rise to defaults and repossessions based on “low income growth” (meaning people with low-paying jobs and little career horizon).

She did not make a direct connection between bridging and this trend of risky credit. It was inferred, however, that bridging, being somewhat unregulated, could have something to do with it. 

It appeared indeed that Lynda and the FCA do not wish to discriminate between short-term, high-value bridging for business purposes and payday lenders and long term sub-prime mortgage companies aimed at vulnerable consumers.

Taking questions, she stressed that if there are “unintended consequences of regulation, it's really important that you talk to us. We have to regulate down to the lowest common denominator.”

 

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