FCA's bridging finance MI at risk of distortion

At the recent ASTL conference, the FCA’s Lynda Blackwell stated that the regulator’s ‘market intelligence’ is sourced from trade press reports.

During the ASTL conference, on being questioned by Brightstar Financial’s CEO and AOBP Chairman Rob Jupp, the FCA’s Lynda Blackwell gave clarification on the regulator’s awareness of the bridging industry. She stated: “We know, we read the trade press …[we refer to ] data on the market - my team spend a lot of time trying to look at that market and get as much intelligence as we possibly can.”

With trade press reports being an apparent dominant source for bridging knowledge for the FCA, it is therefore vital that the trade press is a representative mirror.

Generalisations and vague or unsubstantiated statements in the trade press, especially those that are dramatic in nature, could then have a very real and damaging effect on the industry.

When talking about the implications of using the trade press for MI, Bob Sturges from Omni Capital stated: "During the Second World War, Britons were regularly reminded that "careless talk costs lives". We may not be at war in the bridging industry - at least I hope not - but people should be aware that careless talk can also cost hard-won reputations.”

Keith Aldridge of Capital Bridging added: "Having listened to Lynda Blackwell of the FCA at the recent ASTL Conference and in the wake of some of the inaccurate accusations levied at the bridging sector, it is very evident that we have a great deal to do to educate the FCA in the many areas that they appear ignorant of what is happening in our sector.”  

In light of this, B&C has extracted some recent generalisations appearing in the trade press that could hold the potential to cause a lasting and damaging effect on the face of the short term lending industry.

“[There is a fear] that our market…has become riddled with people out for themselves.”

Although a preceding comment notes that several professional and experienced bridging lenders do exist, this particular statement goes on to infer that the growth of the market and the rising level of competition has resulted in a prevalence of unethical firms. However, some bridging professionals did not agree.

Jonathan Sealey from Hope Capital argued: I think that’s an unfair generalisation.” He added: “I don’t think the market is ‘riddled’ with people like this at all. Like any industry, there will be people who can be put in this bracket, but in this industry, they won’t last long.”

Joshua Elash, Director of MTF, commented: “In our opinion, the bridging finance market is now being driven by entities who, whether regulated or not, are committed to providing short term finance in an institutional, transparent and ethical fashion.  

“The market has never been as competitive. This competition amongst lenders has manifested itself into better prices, products and services for consumers.”

“The FSA is concerned that advisers could be recommending this type of loan too quickly when it may not be the best solution.”

If backed up by statistics, I.e by specifying or indicating the amount of advisers accused of this conduct, this statement could have made for a constructive pointer for industry advisors and borrowers. However, the comment seemed to lack this.  

Bob said that although the press has to bring poor practice into the open, “accusatory language alone is insufficient: it must be supported by hard facts and a willingness on the part of the accuser to make them public.”

“Some bridging lenders are deliberately luring borrowers into low monthly interest rate loans…”

Contemplating possible counter arguments to this comment, Jonathan considers that as long as no hidden fees or sudden rate rises occur from the lender, “if the interest rate is low, then why wouldn’t a borrower be happy to progress the loan?”
Without giving concrete and quantitative evidence to illustrate which, and how many, lenders are conducting this sort of practise, alone, the highlighted statement is insufficient and potentially misleading.

To conclude, the exposure of wrongdoing and corruption is one of the prominent, and necessary duties of the press. However, this must be conducted and expressed in an accurate and transparent manner.

Bob maintains that it is beyond doubt that some poor practice exists within in the bridging market, however, “to risk tarnishing an entire sector that has made, and continues to make, great progress in raising standards, is both foolish and unnecessary."

“A vigorous and lively trade press has a key role to play in raising understanding and stimulating discussion. But careless use of language, often designed with PR and short-term headlines in mind, can all-too-easily backfire, not just on the vocalist, but on the rest of us too.”