Shadow of fraud looms over industry, says NAFCB

The National Association of Commercial Finance Brokers (NACFB) has pledged to intensify its fight on fraud, after admitting financial crime is becoming an increasing issue within the commercial sector.

While the issue of fraud has come under the spotlight within the mainstream mortgage arena in recent months, the problem is showing signs of spreading into other areas.

The NACFB said it is hearing increasing reports of frauds from its members, and confirmed that it was seeking measures to act against those outside of the association who are seen to damage the reputation of the industry.

According to the trade body, the fraud usually takes the form of upfront fees. The broker will entice borrowers with advertisements claiming large LTVs and low rates, or attempt to get other brokers to forward clients to them, claiming that they have access to funders who are still lending.

The brokers will charge an appraisal fee of around £250, then follow this up with further site visit fees and completion fees, often sums in excess of £1000. The deal is then derailed with the requirement of additional security or guarantees which the client is unable to supply.

Adam Tyler, chief executive of the NACFB, commented: "The way in which the fraud is committed is based on legitimate business practice. Brokers will often charge an appraisal fee to look at a case - in the case of fraud the fee being charged is usually, although not always, larger and the broker or lender has little or no intention of finding the client any kind of finance in return.

"The problem for us is often getting hard evidence. We get numerous verbal reports, but no hard evidence. Without this, there is not much we can do, but where we do find evidence that a member is carrying out this kind of practice, then they will be expelled from the association. On expulsion, the other members and patrons of the association will be informed why that firm is no longer a member, and the necessary authorities will also be notified to ensure that the consumer credit licence is revoked and criminal investigations can be instigated if necessary."