Regulatory protection for bridging borrowers

Regulatory protection for bridging borrowers

To understand the level of regulatory protection bridging borrowers get, you need to establish a few things. Firstly, find out whether the loan you are proposing to take out is regulated by the Financial Conduct Authority. A regulated loan gives you much more protection. Mainly in how it is sold, and in your ability to complain if it is not sold correctly.

What you should expect

Your broker will normally inform you at the outset. But in the case of regulated loans, it is mandatory for your broker to explain the scope of their service. This will include the types of products offered, the likely fees involved and information about how to complain etc.

The key point is that, in the case of a regulated bridging loan or mortgage, your broker should give you full advice. Including loans which are suitable to your circumstances and needs. This means carrying out a detailed fact find and only offering products which the broker deems suitable. You should be able to rely on this advice, provided you have given accurate information. If you have a material complaint which the broker won’t resolve, you can refer the matter to the Financial Ombudsman Scheme.

Is my bridging loan regulated?

Your broker will tell you. But as a guide, regulated loans are aimed at consumers who may not be familiar with taking finance of this nature. The following are examples of loans which are typically regulated and should be offered on a fully advised basis:

• A first or second charge loan secured on your main residence taken out by the homeowners in their personal names.
• A first or second charge loan taken out on a buy to let property where the property is or will be occupied by family members.

Borrowers taking out regulated loans enjoy a higher level of protection against taking out an unsuitable loan.

Is my bridging loan non-regulated?

Non-regulated bridging loans usually have some business or commercial element. This could depend on the type of property being offered as security, who is borrowing the money (perhaps a business) and the purpose of the loan. The loan may be offered on a non-advised basis, which is faster and gives business people more flexibility. The broker will offer products which closely match the requirements or given circumstances together with the relevant information to allow borrowers to decide themselves which they feel is suitable.

Borrowers taking out a non-regulated loan on a non-advised basis are taking responsibility themselves to ensure the product is suitable.