Richard Deacon, sales and marketing director at regulated bridging lender Masthaven, also said the lender had recently been visited by the FSA.
He said: “The big thing that came out of it was education of the end broker.
“The FSA’s answer if you will, very guardedly I might add, is that our job is to educate brokers in a face to face meeting as to what an FSA regulated loan is, the appropriateness of it to a client and making sure you understand the product.”
Rob Jupp, managing director of bridging specialist broker Brightstar Financial, said he was “staggered” by this stance.
And he added: “I am absolutely staggered the regulator would think we would not know what the definition of that is when most of us have been in a regulated environment probably longer than most of them have. I would love to be able to have that visit.”
Meanwhile Robert Sinclair, director of the Association of Mortgage Intermediaries, said he suspected the regulator was doing extensive research into the bridging sector after Sheila Nicoll, the FSA’s director of conduct policy raised concerns in November last year.
He said: “Historically when the FSA has done anything they tend to flag it in a speech initially.
“They might then do some research work and then do something else where they pass their own comment and then they’ll start more research and I think where we are now - more research.”
Sinclair said he knew the regulator had already visited at least two lenders.
He said he suspected the next steps would be more detailed research and potentially some visits to brokers arranging deals and borrowers directly.
He said: “If I was the regulator today then I’d be going into a few lenders and look at some files.
“I’d be taking details out of those files and then I’d be going after that to some of the firms who are placing that business and looking at their versions of the files and see if there were any gaps.
“I’d then talk to the customers about what was actually said and what they wanted and needed.
“At the end of that process I might publish a report or send some DCO letters and say you need to think about these things.
“If I was a supervisor in the FSA that’s what I would think about doing at the moment.”
Sinclair said it was possible that the regulator would repeat this exercise in 12 months time to assess whether behaviour had changed.
“That’s the way the regulator tends to work in an area where they don’t think there is significant consumer detriment because this isn’t causing significant consumer detriment,” said Sinclair.
And he added: “There are risks around this issue if their concern is that the market is going to grow significantly in volume and they don’t understand what is driving that growth in volume and value. Therefore that’s their confusion.”
The FSA declined to comment further.
