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Distributors back Lloyds’ quality move but call for increase in proc fees

Major distributors have reiterated calls for lenders to increase proc fees after it was revealed Lloyds Banking Group would introduce quality-based remuneration from next month.

Mortgage Strategy revealed the lender would switch to quality-based proc fees in September, a year after revealing it was considering the idea.

Then last week the lender revealed it would introduce the new payment system for its key accounts from 6 January.

The lender will base payments on the applications to completions ratio, arrears performance and what measures a firm has put in place to prevent fraud.

But the move has prompted calls for lenders to begin increasing their proc fees, as distributors say the cost of acquiring new clients will increase as a result of the MMR.

Mortgage Advice Bureau chief executive Peter Brodnicki says he agrees with the lender’s push for quality and says Halifax has shared performance data with his firm regularly this year.

He adds: “I do agree with the lender’s quality agenda. The impact of quality on procuration fees was always coming, and although the best performing firms will benefit, I believe that there is room to further recognise the significant infrastructure investment these firms have made to achieve the high standards that ultimately result in savings for the lenders.”

While his firm will not be directly affected by Lloyds’ change, Legal & General Mortgage Club managing director Ben Thompson also believes some lenders should increase proc fees.

He says: “As a general rule, over the course of the past five or six years proc fees have been on a downward path from most lenders and some lenders have overshot the downside.

“Therefore, some lenders arguably need to go up again, rather than a wholesale call for higher proc fees. It would be nice to see it all done and tidied up before MMR is implemented and then not have to be able to talk about proc fees again.”

Speaking to Mortgage Strategy, Lloyds director of strategic relationships Peter Curran says the move is “cost neutral”, meaning it has not increased or decreased the overall amount it pays brokers.

He adds: “Some will be getting more money and some will be getting less and that is fine, because we are rewarding people who are doing a better job.

“The question then is: if everyone improves, what will you do? That is something we will have to wait and see when we look at that analysis. We have always got our eye on proc fees and we will take it from there. We are not cutting proc fees, we are just spending it differently.”

Curran adds it is good for the industry to focus on quality.

He says: “It is good for the intermediary industry to have evidence that we are taking a focus on all aspects of risk, of customer treatment and customer knowledge. It can only be good. But key for us is we do this in a fair way.”

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