Speaking at a Bridging Introducer roundtable, outgoing ASTL chief executive Adrian Bloomfield told industry leaders he would raise the issue with the executive committee.
He said: “It may well be that this is a serious issue or that we need to examine it, explain it, identify it or come up with a recommendation for it.
“We may need to write a position paper where the members think we all need a code of behaviour, or the members may think this is not an issue to contend with.
“The trade body is a servant of its members so if the members ask the executive to deal with a matter and analyse it, then of course we will.
“If it is a conflict of interest with the members then we won’t. I have no mandate to step in to a lender’s own issues.”
His comments were provoked by research done by Precise Mortgages showing some bridging lenders are charging clients thousands of pounds in interest on the interest they borrow to service the loan over the whole term.
But Precise Mortgages has said it will only charge interest as the money is released to the borrower rather than on the entire amount from day one.
Alan Cleary, managing director of Precise, said: “There need to be standards set. One of the big things which a trade body should do is to create consumer confidence.
“There are massive inconsistencies in how lenders operate, which is fine, but in another respect it’s not good for customers.
“The inconsistent nature of how lenders calculate interest in this space is just one example - virtually every quotation put out in the bridging market is inconsistent and incorrect.”
Cleary said while it may be legal this practice isn’t transparent.
“I’ve got empirical data that shows lenders quoting the same rates but coming up with completely different amount repayable to customers, how does that work?” Cleary questioned.
“This is mathematics surely. We have one case where a customer is being charged £28,400 more interest with another lender compared to our quote and we’re both quoting the same rate. That’s wrong. It’s not transparent; clearly it’s not good for the customer.”
Laurence Goodman, chief executive of Bridgebank Capital, said he thought trust was an issue for borrowers.
And he added: “Some lenders are still guilty of not fully identifying the costs of their lending. That’s something that the ASTL should be looking for as a standard for members so what lenders are offering is transparent.”
Meanwhile Rob Jupp, managing director of Brightstar Financial, said Cleary’s point wasn’t “just another throwaway statement”.
Jupp said: “What he’s saying is proven, this is of fundamental importance to the future of short-term financing.
“Let’s not overstep this issue. If Precise is proven right there’s going to be a lot of soul searching for all of us but particularly the lenders.”
Cleary added: “I’m pleased the ASTL has committed to investigate interest rate charging in the industry.
“Although it has not said it will act this is an important step towards improving transparency and professional standards.”
