The letter, issued last week and copied to mortgage industry trade bodies, could see an end to practices such as lenders being forced to pay to be on network panels.
It states: “We have been told that in some instances product providers and intermediaries may be contemplating significant upfront payments (in some cases upwards of £1m) as a condition for the provider's products being placed on, or even considered for, the intermediary's panel Such payments would not be consistent with the standard of conduct for firms – irrespective of whether they will be whole of market or multi-tied.”
Large networks with bargaining power, like Sesame, have been asking lenders for money, describing this as a marketing fee. Sesame denies it is an inducement. Commercial director Martin Davis says: “None of our panels are ever chosen on what lenders pay. We use the money to commit to resources like training and we make this very clear.”
One industry source suggests the letter could have implications for lenders looking to secure distribution.
He says: “If I were a lender that had acquired a packaging company or network, or had invested heavily in the compliance function of either, I would be keeping a close eye on the level of business coming from that operation. In some cases I would ask whether my products should be on the panel. Are they there because they deserve to be or merely because I own the facility?” But one lender, who asked for anonymity, adds: “The regulatory regime requires intermediaries to justify the selection of a product provider based on each individual's circumstances. An intermediary can hardly justify a recommendation on the grounds of a previously paid inducement so I don't know why anyone would pay such an inducement.”
Freedom group compliance director Stephen Atkins warns lenders are likely to consult and formulate a uniform response which could put some networks in a difficult position.