NACFB Broker Assurance: What the programme means and what you need to know

Summary

Last month’s announcement from the NACFB of an enhanced broker Assurance programme marked the first step in closer collaboration between the trade body and the Finance & Leasing Association (FLA) to ensure broker/lender interactions are transparent, efficient, and demonstrate mutual trust. It is highly significant, coming as it does against a background of increased regulatory scrutiny and compliance challenges.

“I’ve been a massive advocate for this for quite a long time. By joining together to handle assurance through a centralised approach, the efficiency gains are unbelievably good. And as more and more lenders sign up, it’s a win/win for both sides.”

AFC ran a webcast in early July to provide more detail of how the new process operates, how it fits within compliance frameworks, and how it’s already being applied in real broker-lender relationships.

There is a clear appetite for change, as the 200 webcast attendees showed when they voted on the first poll of the session, which asked if the current process whereby brokers have to respond to individual lender questionnaires was inefficient, with 70% agreeing this is the case, a quarter of them (29%) “strongly”.

Indeed Sarah Cunningham, NACFB head of compliance, said that some brokers reported responding to over 50 separate questionnaires from lenders on their panel, many of which were asking for duplicate information, making for a time-consuming and frustrating experience.

How does the programme operate?

The broker assurance process is wide-ranging and covers the information requirements of an FCA licence; appointed representatives; the use of introducers; internal documentation and policies; and a check of websites to ensure all necessary regulatory statements are showing. Brokers are also asked for details of any complaints in the past 12 months; training plans; and protections against fraud such as ID verification and the use of funders’ websites.

Cunningham outlined the steps in the process as:

• Questionnaire is issued to broker
• Documentation is sent to NACFB and assessed as to whether it adheres to requirements
• Internal checks
• Support calls from the NACFB to the broker to discuss any points raised by either
• Remediation requests sent to broker member
• Remediation reviewed
• Certificate is issued which can be used with lenders and displayed for borrowers

“It’s important to stress that this is a consultative and not a combative process, designed to encourage best practice for brokers.  It is not a one-time audit and does not replace FCA compliance,” Cunningham explained.

The NACFB compliance team expects to review a questionnaire within 24 hours and to book a call to chat through the information with the broker member within two days.

“Then it’s up to the broker’s timescale. Once they are through remediation – and we can provide template documents and policies for any information that is missing – the quickest we’ve completed an Assurance Consultation Process (ACP) is three days. Some brokers prefer to handle remediation in little chunks, so it might take longer, but we aim to have it boxed off in a month,” Cunningham said.

Along the way, there are the options of video calls or phone chats with the NACFB helpdesk to guide broker members through any issues around how the online process works, or what documentation is required. The NACFB offers broker members “best practice points”, which are designed to encourage enhancements in the way they work. These are not a requirement of the process but are aimed at creating uniformly high standards.

The Assurance Consultation Process (ACP) is included as part of a broker’s membership cost, which is £69 a month, and there is no extra charge for this programme.

What are the programme benefits?

The information provided by NACFB broker members is available to view by lenders who are NACFB patron members, and when a lender clicks on a broker to see the assurance information that triggers an alert to that member to allow the lender to view the process.

“For some lenders all of the information they need is already collated, and for some they may require additional oversight. Patron lenders, with the consent of the broker, can see the questionnaire and the final version of the documentation,” Cunningham outlined.

This approach cuts duplication of effort enormously, introducing significant efficiencies and offering a way to encourage adoption of best practice procedures.

“Some lenders will have to have their own direct approach to the broker on top of this, and if they are a bank-regulated lender that is a requirement.  But we estimate that the broker assurance programme will deliver 80% of what we are typically asking for.”

This prediction was overwhelmingly endorsed by the second poll of webinar attendees, which found that 91% believe the assurance programme will make the broker review process more efficient, with 39% “strongly” agreeing this will be the case.

NACFB CEO Jim Higginbotham pointed out that patron lenders will be able to have confidence in the assurance as they will have sight of the questionnaire and the processes, so it is “not the case that we are marking our own homework – lenders have access to the same information and can make their own opinion. Each organisation will have a different bar to set as their standard.”

Processes have become more efficient through digitisation, so onboarding is quicker, but greater collaboration will produce efficiencies and brokers will really feel the benefits when the lending panel adopts this approach.”

There is strong impetus for lenders to come onboard, given the current legal challenges and regulatory pressure around commission disclosure, fiduciary duty and treating the customer fairly. Currently there are 165 lenders who are NACFB patrons.

As Randall, who has been working behind the scenes with Phillipou at the FLA, explained, “We are talking to lots of FLA lenders and at least ten of the very biggest names are very supportive. In my opinion, it’s a no brainer – we need to show that our industry is on the front foot and that we have our house in order, before the regulators tell us what to do. With the broker assurance programme, we have a robust, transparent way of demonstrating our standards.”

What are future plans?

“There will be lenders who are not currently NACFB patrons but who still need access to the assurance programme. Meanwhile the FLA has accreditation requirements for its members, who are primarily lenders, so there is a piece to work to do on the collaboration and partnership between the two associations on throughput,” Phillipou explained.

Being able to display industry body accreditation is clearly important for brokers working within the SME market, and Higginbotham pointed to work the NACFB is doing with the British Business Bank and others to raise awareness amongst SMEs of the work of intermediaries as part of the widening access to credit agenda.

While the broker assurance programme is not directly linked to potential requirements around fiduciary duty (should the Supreme Court ruling uphold this decision on the broker’s role), Higginbotham pointed out that any new compliance requirements can be folded into the process.

And there is clearly an appetite to take the programme further – three quarters of those polled during the webinar agree or strongly agree that as the interface between lenders and brokers becomes more digitised, so real-time verification becomes an option.

One of the questions raised during the webinar was whether the increasing compliance challenge would result in more lenders employing a direct salesforce, rather than working through brokers.

“It’s all about routes to market. Most lenders can’t afford a direct salesforce in every part of the UK, so a local broker who knows the local business community and can service the local area is essential,” Higginbotham maintained.

In conclusion, with a robust, transparent and efficient broker assurance programme in place, the challenge now is for more lenders to join in as NACFB patrons, since the more who are involved, the greater the benefits and time and cost savings.

“And we all need to show the FCA that we are not sitting on our hands, but we are actively improving our processes and encouraging best practice. If we don’t get our house in order, we open the door to the regulators doing it for us, and to our detriment,” Phillipou cautioned.

Watch the webcast in full here.

For more information, contact the NACFB’s compliance team