The Finance & Leasing Association (FLA) anticipates between 50–100 broker firms will sign up to its newly launched asset finance accreditation scheme within the first year, which the trade association says is specifically designed to significantly reduce the paperwork involved in demonstrating to funders that they meet regulatory requirements.
“The problem our members are working to fix is the fact the FCA requires regulated businesses to ensure their intermediaries are doing the right thing and adhering to best practice. That means brokers with multiple funders on their panel are answering the same questions again and again. That’s not optimal for brokers as it takes time away from doing business,” explains Simon Goldie, the FLA’s Director of Business Finance & Advocacy.
The issue has become more acute in recent times with new requirements from the British Business Bank when it launched the Coronavirus support schemes and new concepts such as Consumer Duty all increasing regulatory pressures. Goldie said the FLA felt it was well placed to adopt a scheme as it its members are directly connected with asset finance brokers, who form only a part of alternative trade associations such as the NACFB.
Under the new scheme, brokers will pay an annual fee and be assessed by a third-party specialist asset and inspection provider, X VAS, to check they meet regulatory requirements. Those that pass this process will be judged to adhere to best practice, and will be able to say so on their website and in dealings with funders.
Goldie said this review is based on a document developed with FLA members which has a base set of questions. Brokers who are unable to satisfy all the requirements will be informed of areas to address and can then re-apply for accreditation. “If there is a fundamental issue then we would work with them to get to the right place,” Goldie said.
Goldie acknowledged that the review will not necessarily cover all the information an individual funder requires, saying: “We do expect funders will ask some additional questions depending on their particular circumstances, risk appetite, whether they have overseas owners, their own attitude to regulation, and so on, but the bulk of what’s needed will be available from the review.”
“It will take away a vast amount of duplication which is a key benefit for both brokers and funders.”
While funders who are FLA members will be able to check if a broker meets best practice as laid out in the scheme, Goldie says “we are not stipulating lenders only use accredited brokers – it’s up to member firms as to the view they take.” Lenders are not charged to use the service.
Accredited brokers who are subsequently found to have failed to meet the required standards in some way will be assessed by an independent panel on a case-by-case basis, Goldie says. Currently there are no specific sanctions – Goldie points out that the FLA is a trade association, not a regulator – but he says loss of accreditation would be a “reputational issue” with ramifications for the broking firm.
He also cites the creation of a broking group within the FLA as another benefit of the scheme, giving brokers the opportunity to share in the association’s regulatory updates and, potentially, in some bespoke training.
Goldie reports seven or eight broking firms signed up to the initiative within 24 hours of the scheme’s launch, but says the FLA recognises that it will take time for the accreditation process to bed in.
“We will be flexible and realistic and try to make the process as easy as we can and not onerous. For us it’s a journey, and all part of the push to drive best practice. We need transparency and clarity, and we are providing an information service to do that.
“The balance of the benefits is on the brokers’ side - if we can achieve a significant reduction in the amount of time and effort spent on proving they meet requirements, that is a huge win,” he concluded.
Asset Finance Connect are launching a unique and important webinar series for the UK asset finance community focusing on how brokers and lenders can collaborate to protect the broker channel for the benefit of its customers.
The first in this new series of webcasts for the UK broker industry will be held on 21st March at 1pm (UK) providing an online analysis of the FLA’s new accreditation scheme for asset finance brokers with a unique opportunity for brokers and lenders to ask their questions direct to the FLA team.
