The White Paper sets out the regulatory options for the industry, which include staying under Office of Fair Trading and Consumer Credit Act control, or accepting full Financial Services Authority regulation.
With the implementation of the European Consumer Credit Directive, a change to the regulatory landscape is inevitable.
Robert Sinclair, director of the AFB, says: “It is vital that we take a pro-active approach to regulation of our industry to ensure the best outcome for brokers, lenders and, most importantly, consumers.
“We must put consumers at the heart of any reform and ensure their needs are served. Consumers, and consumer groups, are likely to see a move to FSA regulation as positive. An improved perception of second-charge lending could lead to increased interest in products, and increased awareness of the sector.
“Secured lending has a part to play in debt financing but it is vital consumers are treated fairly and well protected. We have already been in discussion with government and the regulators and they are keen for the industry to reach its own conclusions. If not, we will have that power taken from our hands.”
The AFB is calling for comment from intermediaries about how best to move forward. The AFB wants to find a solution that will benefit consumers and all those involved in the secured loan broking industry.
Sinclair adds: “Because the EU Directive affects all unsecured lending, the UK is required to make significant revisions to the existing rules, which also cover secured lending.
“This may inadvertently capture secured loans within the new requirements or create a two-tier regulatory system. The alternative would be to take the opportunity to move to a new regulatory system under the control of the FSA.
“The reality is that we have to change the way we operate. The industry must agree on the best way forward. A united desire to produce the best outcomes for the sector and for consumers will allow representative groups maximum time to work with stakeholders and regulators to achieve these outcomes. Procrastination and disagreements could potentially weaken our industry.”
The AFB is calling for comments on the Paper from all intermediaries by September 30.