In a major blow to the bridging finance industry, last week saw short term lender Bridging Loans Ltd and its director Joseph Cummings become the first bridging firm and director to be fined by the FSA for serious failures relating to lending practices.
Bridging Loans Ltd was dealt a £42,000 fine, whilst Mr Cummings received a £70,000 fine – reduced from £100,000 for agreeing to settle at an early stage of the investigation.
The firm did, however, retain its FSA authorisation.
In a statement released by the regulator, Mr Cummings was said to have shown "total disregard for the interest of his customers".
Not only did the director receive a Final Notice, but so did three members of his family; Miriam Cummings, Laura Cummings and Susan Cummings, who have been banned from undertaking any "significant influence function" at a financial services firm.
In a statement released by the firm, issued exclusively to Bridging and Commercial, Bridging Loans Ltd denied refusing the FSA access to their office and blamed Mr Cummings’ ‘old school’ lending practices for the fines.
“We obtained approval in 2004 to undertake regulated lending. In June 2009 we first became aware that parts of our administration were being conducted in breach of the Regulations.
“Contrary to what is stated in the FSA Press Release, Bridging Loans Ltd and its directors did co-operate with the FSA and access was provided to all of our files.
“One of the main problems was that Mr Cummings was “Old School” and he didn’t put the right ticks in the right boxes. At the time of our initial approval in 2004, the Regulations were designed for the protection of long term mortgage customers and were not clear in relation to many aspects of short term bridging finance, which is the sole market in which we operate,” said Bridging Loans Ltd.
In reference to the low level of fines, the firm said they were “a proportionate response to the errors identified, and reflect the nature of the FSA’s findings.”
Adding, “We have been working with the FSA to update our approved personnel and our systems and controls, and we have appointed a skilled person, approved by the FSA, to assist in the process.
“Bridging Loans Ltd has not undertaken any new regulated loans for over a year and the problems identified by the FSA related to historical cases, the majority of which completed over 4 years ago.
Commenting on the case, Ray Cohen, Compliance specialist and Director of the recently formed Association of Bridging Professionals (AOBP) said: “Bridging Loans Ltd are by no means the first specialist bridging company to be looked at by the FSA and neither will they be the last.
“There is no room in the regulatory environment for those who do not meet the compliance standards as has been seen by the FSA's more recent approach to fining and banning individuals as well as firms themselves.”
Bridging Loans Ltd told Bridging & Commercial they felt ‘targeted’ by the regulator. “We suspect that we are the first bridging lender to be targeted by the FSA as we have never undertaken that many regulated transactions, and therefore the FSA did not have a large number of cases to review.
“We also suspect we won’t be the last bridging lender to be scrutinised by the FSA.
“Mr Cummings is no longer part of the regulated business, which is now run by David Levitus with appropriate input from our FSA approved consultant.”
Commenting on the case, Alan Margolis, Head of Bridging at the United Trust Bank said: “It is clearly disappointing when a lender in the short term sector has been found wanting by the FSA. The case highlights the importance of lenders maintaining the highest standards throughout their business.”
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