Loans move towards the mainstream

It is said that you can tell when an activity has become popular, whether it is in sport or business, because someone feels the need to form a committee and give that activity a structure and rule book.

In the financial sector we have seen the ultimate committee formed in the shape of the Financial Services Authority, and it has had a dramatic effect on the first charge mortgage market.

But the secured loans market, while not yet being favoured by the attentions of the regulator still has its share of bodies and trade associations, all looking to improve its standing and that of the lenders and intermediaries involved in the sector.

The Finance Industry Standards Association has been the secured loans sector’s watchdog since it was formed in 1988 as a self-regulatory body with the support of lenders and intermediaries. Originally set up to help improve the standard of credit advertisements the association now covers any issues relating to the marketing and supply of credit.

Especially in the early days, intermediaries wishing to engage in the selling and processing of secured loans needed to be members of FISA for the simple reason that the vast majority of lenders were also members. Obtaining FISA membership and abiding by its rules was the only way to remain in business as an intermediary wishing to offer clients a full inventory of lenders. Without FISA membership, the majority of lenders were off limits.

Intermediaries had already had a representative body since 1982 in the form of the Corporation of Finance Brokers which was also a self-regulatory organisation but formed to serve only the interests of brokers.

In May last year, the CFB’s members approved plans to wind up the organisation and move instead towards the formation of a new body, the Association of Finance Brokers. The aim was to get this accepted as a part of the larger Association of Independent Financial Advisers and as a sister trade body to the Association of Mortgage Intermediaries.

This history lesson in the self-regulation of the secured loans market is instructive for an important reason. Recent changes to the Consumer Credit Act and the harmonisation of compliance procedures through the Financial Ombudsman Service have helped to bring the secured loans market into the orbit of a greater number of intermediaries who work in the FSA-regulated environment.

The work done by FISA and the AFB in association with AMI will accelerate the process of assimilation and speed the acceptance of secured loans into the mainstream market.