CMM comment on short-term lending debate

CMM managing director, Graham Allen, recently attended a forum staged by the Association of Bridging Professionals (AOBP) which saw representative from six of the UK’s most prominent short-term lenders lead a lively debate on the issues faced by the industry.

Without doubt, the most pressing issue discussed was lender transparency and the question of policing or regulation of the sector.

An executive director of the AOBP, Graham has followed up on the forum with an article in which he defines lender transparency as offering a service in “utmost good faith”.

And whilst acknowledging the argument that statutory regulation is inevitable, he urges bridging professionals to implement and demonstrate best practice on transparency as a matter of urgency to allow the industry significant input into how regulation is structured if and when the day arrives.

He explains: “This would surely be preferable to having regulation thrust upon us with little consultation and without the benefit of the industry’s considerable experience of the issues – remember, the regulator only has to say that regulation is being introduced in the interests of the consumer and all our objections might be swept away (as they were in the case of domestic lending) if we haven’t a robust working model to show what we already do in the interests of the consumer.

“By my reckoning, any kind of voluntary self-regulatory policing would need to include a transparency protocol, by which lenders would be obliged to abide.

“Key features could include a memorandum of understanding, and terms and conditions that would apply to all types of short-term lending.”

The forum also saw strong debate over the use of APRs which some members of the profession regard as an irrelevance, due to the short-term nature of the average loan.

However, Graham challenges this saying: “I think it is important to the customer, who is the broker in the first instance, and the consumer in the second instance.

“When these customers are trying to make a choice between different providers, this information is highly relevant and it is important that the lender is provided with all information, including broker’s fees, so that an attempt can be made to produce an assumed APR.

“This would best be done using an agreed calculation method applied across the sector – a constant benchmark to measure against.”

Finally, the debate covered legal representation, which, as Graham sees it, remains the choice of the individual lender – as long as the client is aware of what is required from the outset, single- or dual-representation will be one of the determining factors in the client making their choice.