Lenders have “no right” to question the fees charged by brokers, many in the industry have argued after one broker was told to lower his fees.
FT Adviser is aware of a recent case where a broker, who arranged a £40,000 loan, was told by a lender to reduce his fees given the size of the loan.
However, the lender informed the broker that, had his client borrowed £49,000, his fee would have been justified, despite the fact the exact same work was being done by the broker.
Lodestone Mortgages and Protection director, Craig Fish, argued this is outside lenders’ purview, saying that “many lenders themselves impose exorbitant arrangement fees far beyond what’s reasonable”.
“The regulator must step up and address these issues, which are especially harmful to vulnerable customers,” he added.
“It’s unacceptable to justify higher fees due to a client’s imperfect credit history or to meet affordability rules for buy-to-let mortgages.
“Both lenders and brokers who exploit these situations can be seen as wolves in sheep’s clothing.
“Protecting consumers should be the priority, and it’s the regulator’s responsibility to enforce this, not that of the lenders.”
This sentiment was echoed by several other members of the industry, such as Yellow Brick Mortgages managing director, Stephen Perkins, who argued: “It’s not lenders’ place to question the fees of their introducers.
“That fair value assessment lies with the broker and their relationship with the Financial Conduct Authority.
“The lender should keep in their lane and review their own product fees and early repayment charges, all of which seem grossly unfair in value terms.”
Meanwhile, Simply Lending chief operating officer, David White, said: “Linking a broker fee to the size of a loan doesn’t make sense, nor does it treat customers fairly.
“The level of work involved remains the same, whether a customer borrows £40,000 or £400,000.
“Consumer duty should ensure that all firms maintain a transparent fee structure that is reasonable, yet I fear this is not always the case.
“That said, I believe that lenders should not be involved in this process. The FCA should regulate brokers, not lenders.”
Additionally, The Mortgage Geezer managing director, Darryl Dhoffer, said: “The FCA’s latest move to involve lenders in policing broker fees raises questions about the regulator's priorities.
“While consumer protection is undoubtedly important, it seems odd to delegate this responsibility to lenders, who may have their own vested interests.
“This approach could lead to a less transparent and less competitive market, where lenders and brokers collude to maximise profits at the expense of consumers.
“A more robust regulatory framework, with stricter oversight of broker fees and practices, is needed to truly protect consumers, and leave lenders out of the pot.”
tom.dunstan@ft.com
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