How have you adapted to the April 2008 changes to the CCA?
The main change is the removal of £25,000 cap for regulated loans. Our original business model was based on non reliance of redemption income and therefore at the outset, all our loans were regulated regardless of loan size. The market will become more transparent with the extension of CCA regulation to all loans.
A key reason for launching White Label Loans is that we wanted to create a lender which was not dependent on PPI income or large ERC’s. The changes to the CCA allow the company to provide this completely transparent and fair approach on a level playing field. The benefit of being a new player is that we can put the necessary infrastructure in place from day one.
What are your biggest fears for the secured loan market?
My biggest fear is the current liquidity crisis which has been a major issue for the whole financial services industry and which has caused many well run organisations to withdraw from the market completely. Intermediaries are suffering the most and with increased pressure to change their business model and increased overheads including astronomical rises in their PI insurance, it is a tough marketplace to be in.
White Label Loans is situated in the ‘status’ part of the market and is not in the non-status/adverse loan market. However, for both categories, and the grey area in between, we anticipate 2008 being a difficult year. There is a need for lenders to be conservative and prudent in their approach. That’s why we have focused on quality and putting in place the right controls.
How successful has the pilot been?
The initial phase has gone extremely well and has enabled us to gauge interest in our product range as well as to determine the quality of the business we are receiving. We are ensuring that the infrastructure is in place for a long term commitment to the market. We encourage customers to provide feedback on our proposition in order to ensure we have the right processes and overall package in place.
What feedback have you had from brokers?
It’s been very very positive on the whole. Brokers have been very supportive about what we are doing and our desire to be truly customer focused.
Why did you choose to launch with the master brokers that you did?
We have selected a small number of brokers who we have had direct experience of over the last 20 years. We know their business models and vice versa. The secured loans industry is about people primarily, as it is in many other sectors too.
Why have you taken a cautious route into the market?
We want to see the business run in a very controlled and prudent way with quality controls high on the agenda.
Why do you feel that you will succeed where others have failed?
Firstly, the first part of the question, why will we succeed? Well that’s based on the key ingredient in this sector ‘people’; having the right people with the necessary experience and dealing with the right people who understand what they are doing and how to package a case Secondly, when you say failed, I assume you mean failed to secure funding. No one has failed yet in the normal sense of the word that they have had credit problems and resultant losses. It’s been a liquidity issue, due mainly to a lack of understanding in the capital markets.
Why doesn’t White Label Loans accept more brokers to its panel?
Because at the present time we would not be able to handle the level of business they would generate. Service and quality is always our primary concern.
Why have so many secured loan lenders, including investment banks, failed?
The credit crisis in the US and the role their ‘second lien’ players have in the sub-prime market over there, frequently topping-up adverse borrowing to 100%, has had a significant impact on the capital markets. Whilst we see that securitisation can play a part in the funding strategy of a secured loans business, in this environment the market has an issue with this approach. It’s fair to say that having spent a considerable amount of time in the City with banks and the rating agencies, there is limited understanding of the differences between the US and UK markets in this sector. It’s a pity because the UK status market is very different from the US experience.
Why are you called White Label Loans?
Because the company provides master brokers with a unique opportunity within the industry to adapt the lending proposition with their own corporate identities. This will provide brokers greater scope for control during the marketing and packaging processes.
What experience have the management taken with them to White Label Loans?
Many of the management team started working together at Endeavour Personal Finance, and then moved to set-up Kensington Personal Loans and SPPL, prior to creating London Mortgage Company. They have brought with them a wealth of experience of the mortgage and secured loans markets gained over the last 20 years, including a deep commitment to customer service and a detailed understanding of what brokers want from a lender.