Halifax’s cap on broker fees sparks industry debate

Halifax’s decision to make such a public announcement on its decision to cap broker fees, suggesting it is part of its fair value assessment as a result of Consumer Duty, has understandably drawn plenty of attention.

Some have been quick to push back publicly, and while I understand this, I’m also of the opinion that having an argument in such a public forum on such an issue rarely delivers the outcome we might all be seeking.

At the same time, I’m also firmly of the view that lenders shouldn’t really be making it their business to tell brokers what they can, or can’t, charge, although I suspect some brokers in various regions of the country will be relieved the fee outlined is of the ‘higher of’ variety rather than ‘lower of’.

It does however seem an odd decision on the part of Halifax to go out so publicly with such a message about maximum broker fee caps, not least because – as we already know in the industry – large numbers of lenders have such policies, they just exist in the background, and are only triggered at the extreme margins.

The other point I would make, which makes me somewhat quizzical, is wrapped in the fact Halifax is generally a very reasonable lender when it comes to its interaction and focus on relationships with brokers.

I’m thinking specifically of its parity proc fee payments for PT business but also on this very issue. To bring this issue to ‘life’ by way of an example where a large mainstream lender queried one of our member brokers charging a certain fee on a debt consolidation case.

The lender asked why this amount had been charged when it had only asked for limited documentation, an AVM was applied, and the case was offered in 48 hours. We asked the lender if they had asked the broker why this fee had been charged and they said no.

So we spoke to the broker ourselves and it turns out they had spent the best part of six months in discussions with the client helping them to get the case ready for the high street, advising where they could make changes to their finances, helping them on credit areas, etc.

In that sense, when you considered all the work the broker had done, the fee charged was more than justified. In fact, you could have argued they should have charged more. When presented with these facts, the lender proceeded with the case. So, not unreasonable behaviour on their part and all done without any need for a public to-ing and fro-ing.

It shows that these cases can be looked at on a case-by-case basis, and once again, I’m left wondering why a public proclamation of this policy was thought necessary, when they could simply continue to work as that lender mentioned above did with us when presented with cases that might seem, what we could call, ‘fee excessive’.

Indeed, you might also justifiably argue, that announcing a policy so publicly might have the unintended consequence that it rings in consumer’s – or their representative’s – ears and they might believe, if they have been charged a fee, that they have somehow been ‘ripped off’, when these might be highly complex cases requiring a lot of work and resource on the broker’s behalf.

Again, this is unhelpful in the extreme and seems to open doors for criticism of brokers for charging a fee for the work they carry out. Hardly seems fair, does it?

The other point I would make is around the justification of this policy being made in terms of ’fair value’ to consumers. If this is a genuine attempt to clamp down on the advisers who are charging hugely-excessive fees, then all well and good, but a) is this really their role?, and b) if this is an issue of fair value, then what of fair value in other parts of the market?

For example, how is it fair value to pay a different procuration fee to a broker purely based on whether they are an AR or a DA, when the quality of the work is exactly the same? Is that fair?

Similarly, what about exclusive products? How is it fair that a consumer who takes advice services from one broker won’t be able to access a number of products – that may be more suitable/or fairer value for them – because that broker can’t access the exclusive products? Is that a fair situation for the consumer?

So, if lenders are going to talk about over-seeing fair value in terms of what they deem a fair broker fee to be, then, given the market has definitely moved on from where there was justifiable reason for differentiation, they are also going to need to look at fair value in other parts of our market, such as proc fee payments to differently authorised brokers and exclusive product access as well. And that’s just two.

Fairness should be delivered in all parts of the market, not just in terms of a determination of whether a broker fee is fair or not.

Bob Hunt is chief executive of Paradigm Mortgage Services