Poll
The Loan Partnership: Then and now
Looking back at the second charge market pre-credit crash would bring back some memories that make the sector look completely different today. Well, it would be unlikely to see a broker contact a client via a phone box in Q2 of 2015…
From the 1970s up until the present day, the second charge market has dramatically evolved.
Loan Talk sat down with John Webb of last year’s Best Secured Loan Broker, The Loan Partnership, to discuss the key differences.
John first got into broking in 1985 while working for his father, where at that point, the majority of deals were made through personal home visits.
On one occasion, John said he had signed up nine clients in Greater Manchester in one day, and had to phone the last one via a phone box to let them know he was on his way.
During this time there was no consideration period and therefore it was much easier for clients to get money straight away.
Alongside this, there were no advertising standards.
From 1985 until the late 80s it was a “free for all” for advertising, John explained.
“Now you have to be so compliant, which is a very good thing,” he added.
Showing further changes between then and now, John said that in 2001 his advertising bill stood at a staggering £1.7m a month, whereas now it is “minimal”.
Examples of advertisements from John Webb back in the 80s
New associations were also launched to represent the industry such as the Corporation of Finance Brokers (CFB) and Finance Industry Standards Association (FISA).
John stated that you could buy the FISA booklet for about 20p, which educated the client about secured loans.
“The OFT looked at that as a good move...it showed that the clients understood all about secured loans,” John said, adding that this was the first of its kind in the industry.
“FISA were trying to lift the image of secured loans,” he continued.
The market, then, relied on commission and PPI instead of fees.
“Some brokers had unbelievably high penetration of PPI,” John said.
“If you sold that properly, your penetration should have been about 45% and some brokers were getting about 85-90%.”
John added that the OFT did not pick up on this until around 2005-2006.
He explained how brokers could earn up to 18% on a deal, whereas average commission runs about 1-2% per deal now.
“There is still money in it, but nowhere near fortunes,” he said.
“The market is now £60m-70m a month. It used to be £500m-600m a month.”
John mentioned how in 1995, an American loan firm took him to the States where he saw a brokerage that was entirely fee-based.
“What happened in America, where everything was fee-based, has now fed through,” he said.
“People have become accustomed to fees. It has been a culture change.”
When discussing the similarities between then and now, John explained that new regulatory changes from March next year will put the power in clients’ hands as to whether they want to opt out of the consideration period.
When asked what he would not like to re-emerge back into the market, John said: “I wouldn’t like the horrendous advertising standards of the mid-80s which just gave the industry a terrible name.”
“Due to regulation there is a lot more work to do on a case to get it completed.
"30 years ago TCF was down the list, but it’s now at the top, and that can only be a good thing.”
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