Networks told to ensure providers pay commission to them, not ARs

27 September 2010 | By Natalie Thomas

Networks have been warned not to allow providers to pay appointed representatives direct, following the demise of another network.

Bridge Home Finance has ceased trading after some of its appointed representatives went into liquida-tion and it had to stump up for indemnity commission clawbacks.

The network had a policy where its ARs were paid direct by life insurance providers.

Paul Day, director of Which Network, says not many networks allow their ARs to be paid direct, but it can be common among smaller ones.
He says: “If a network has a large number of ARs, providers will usually pay it direct rather than the ARs.

“But networks need to protect themselves against potential losses just as ARs do. Networks should make sure the commission is paid to them first and then set up a protective claims account.”

He says the protective claims account would ring-fence any com-mission paid and make sure net-works got paid as well as the ARs. But he adds that not many networks are keen to do this in tough times.

Bridge Home Finance has now applied to the Financial Services Authority to cancel its permissions.

John Bridge, director of the network, says that after a few ARs went out of business, the network became liable for large clawbacks which meant they could not meet the regulator’s capital adequacy requirements.

He says he is trying to recoup some of the money owed to the network by ARs.

Bridge adds: “We did the right thing and told the FSA we could no longer meet its capital adequacy requirements because of commission clawbacks.”

It had around 20 ARs when it closed in August.

Bridge Home Finance’s closure follows the downfall of other net-works such as The Mortgage Times Group and Network Data.

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