Robert Sinclair, director of the AMI, said: “As a regulated broker carrying FSA permissions one has to be very careful if you’re going to put a customer into an unregulated product.
“People need to wake up. If they’ve got unregulated bridging lenders saying to them don’t worry it doesn’t matter they need to understand, yes it does matter.”
Sinclair said regulated brokers should treat unregulated bridging deals in the same way as regulated transactions and do the same level of due diligence on customers.
He also warned regulated brokers about dealing with lenders which pay overrides on unregulated deals as this would contravene FSA rules.
Sinclair added: “If they as a regulated firm are choosing to put people into unregulated products they are running a significant risk that the FSA will come knocking at their door to ask why they’ve done that.”
John Hindle, acting smaller firms manager at the FSA, said: “There seems to be a lot of concern about people using unregulated bridging finance in a scenario where they should be using regulated finance. If anyone comes across that we would like you to report that to us.”
Nigel Stockton, financial services director at Countrywide, said that he believed the FSA should want to regulate the short-term lending sector.
He said: “The FSA should be looking carefully at the bridging loan sector and consider extending the scope of regulation in the market. It is definitely where all the action is.
“From the estate agency side of our business we’re seeing more and more people using that source of finance rather than traditional mortgage finance – something that has changed out of all recognition in the last couple of years.”
In September the National Association of Commercial Finance Brokers said bridging finance arranged by its members had risen 180% year on year.
Last month the FSA fined broker Fastmoney £28,000 and banned its owner and director Simon Latham, and former chief executive, Stuart Mason, for failing to ensure that customers who took out mortgages and bridging loans were treated fairly.
