Following the departure of long-standing CEO Adam Tyler, finding a suitable replacement at the NACFB could have been tricky. Leasing Life caught up with new interim chief executive Rob Lankey to find out how he intends to make his mark on the association during his stint there.
In 2016, the NACFB released its Minimum Standards Document, which outlined how it expected its brokers to conduct themselves. It also produced a summary of minimum standards to help those without the time or inclination to read through the entirety of the original document.
According to Lankey, there has so far been hit-and-miss, sporadic adoption of the standards, which he says can cause problems for the entire chain.
He believes lenders have a responsibility for their brokers, and if lenders are not careful could end up with unenforceable loans. For brokers, compliance is now an inherent part of their business, with the potential for criminal investigations if things go wrong.
Lankey sees this as an opportune moment for the NACFB to get on the front foot, and establish its logo as a form of standard, ensuring patrons are more keen to use NACFB members and become patrons, and in turn making NACFB membership more appealing to brokers.
In order to encourage this, the NACFB has begun auditing its members.
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Describing the minimum standards, Lankey notes: “The Minimum Standards Document, which has gone out to our members, sets out what the audit process will be like.
“The point to stress here is the word ‘minimum’. We are not looking for somebody to be of a platinum standard, and certainly people should not review it that way. This is the minimum thing a member should be able to demonstrate, and it is all about evidence.”
Documentation is key, and there is an understanding that some commercial brokers have not been used to documenting and evidencing everything that needs to documented and evidenced, especially in a way the regulator would need.
For the audit, the aims of the reviews will be to go through a series of self-audit checks, and to effectively give that broker an independent clean bill of health or a remediation.
Although the organisation has just begun the auditing process, it is already looking at how it can use the data collected to benefit patrons.
Lankey notes: “That is valuable data. You could track success of remediation activity, so if you imagine a whole panel of brokers graded green, amber and red, that’s not only extremely useful for patrons to know, but it’s also measurable and traceable.
“We might have had X number of ambers and Y number of reds last month; how many is it this time? You can see it ever-improving.
“I don’t think you’ll ever get to a green position across the whole membership because life is not like that. But you go through that initial review of where we stand today, and then you go through a programme of remediation activities to minimise the number of those sitting in the amber and red categories.”
The association is ideally placed for such a role, he says. For lenders, auditing every broker could create an untenable level of work – some lenders have hundreds of brokers, and these brokers will not always have simple broking structures. Checking every single one on a regular basis would create a lot of work.
From the brokers’ point of view, a broker working with dozens of lenders would find it equally burdensome to be audited with rigour from every single lender, each potentially asking a similar set of questions to the last.
Instead, Lankey thinks it will be preferable for the NACFB to step in, and independently grade each of its members, and let its patrons use the information it finds.
“We have got a lot of ambition in this area, and we have got to be bold enough to put our chest out and take the position of thought leadership in this space,” he adds.
An example of this surrounds getting the correct Financial Conduct Authority (FCA) permissions before conducting consumer credit activity. Although NACFB members tend to deal with commercial finance, vehicle finance brokers especially often have FCA licences and often do some consumer activity.
Lankey notes that those working outside the permissions are committing a criminal activity, would be graded ‘red’ on the NACFB’s audit, and would likely face some form of immediate censure.
He notes: “We’re working with commercially aware people who have probably been doing what they’ve been doing for a while, are fairly bright and aren’t ignorant of these things, especially if they’re members of the NACFB. Is it fair to say someone could do it accidentally? Possibly not.”
He adds that doing so would require a high level of ignorance of the market, the regulation and the minimum standards, and consequently the NACFB would come down quite hard on those it found to be operating in the consumer credit market without the correct permissions.
Ensuring brokers are operating in an efficient, clean manner is more important than just regulation, however. For the past few years, secured credit has been operating in a period of strong growth, with the FLA regularly reporting double-digit growth. Within this, underlying issues might become hidden, only to come to the fore when credit conditions are not quite so good.
Lankey is generally optimistic about the economic situation for the near future, describing the press as sometimes a little excitable about economic news, as evidenced by the reporting of Brexit.
“My observation over the past 20 years is that economists are generally not that great at predicting, even without Brexit. So throw Brexit in the mix and, for me personally, I tend to have to ignore it to some extent and go by the sentiment you pick up from brokers, and what lenders are doing and so on,” he adds.
The continued health of the industry also relies on the understanding that lenders and brokers behave themselves, says Lanke, with brokers looking out for their lenders’ criteria and lenders needing to be prudent in making sure their customers have got adequate affordability for stress scenarios, and they are lending responsibly.
What is clear is that it is part of Lankey's brief during his time at the NACFB to help drive up standards amongst brokers and to support their funding partners.