From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

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CML launches new class of membership for third party administrators

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Published: 22 January 2014 | Author: Bernard Clarke

The eagle-eyed may have noticed that from the beginning of this year there has been a new class of CML membership, designed specifically for third party administrators (TPAs).

This means that we now have the following types of subscriber relationships with different types of firms:

  • full members – lenders with permission from the Financial Conduct Authority (FCA) to "enter into" regulated mortgage contracts and who originate lending to new borrowers are required to have this form of membership;
  • associates – that is, companies without FCA permission to advance mortgages, but who have an interest in the UK mortgage market; and
  • TPA members. Companies that have a permission to "administer" regulated mortgage contracts fall into this category. Occasionally, for logistical reasons, a TPA member may also have a permission to "enter into" lending but this group of members are not, to all intents and purposes, seeking to run a mortgage lending business.

The new category of membership recognises the fact that the TPA sector is now a firmly established part of the UK mortgage landscape, regulated in its own right and with its own particular characteristics.

TPAs share many of the same interests and concerns as mortgage lenders, and the new membership category enables us to offer them a service more closely aligned to their interests – as well as enabling us to benefit from their particular insights into the operation of the market through input into relevant working groups.

But what, exactly, is a TPA? What do they do? And who are the firms operating in this sector?

Essentially, a mortgage TPA is an outsourcing company that undertakes a range of the kind of administrative or "back office" work that lenders in the past would usually have undertaken in-house. While many lenders still operate their own administrative functions, it has become increasingly common for lenders to outsource some or all of these to TPAs. This may be for reasons such as the ability to deliver a flexible service, a reduced need for infrastructure investment or the desire for external expertise.

This work might relate to a whole range of operations – from the processing of documentation to the delivery of information technology platforms for mortgage sales; from operating call centres to handling communication with customers on behalf of lender clients. It might involve a bespoke set of activities relating to particular customers or processes – for example, administering the accounts of customers in arrears, or delivering strategies for contacting interest-only mortgage customers.

TPAs can also offer contingency support in the event of a lender's normal services failing. Not all lenders who use TPAs will use the full range of services that they offer, and not all TPAs operate in exactly the same way. But in a world where the need for regulatory compliance, customer service, cost control, flexibility and technological investment are all increasing, the role of TPAs looks set to expand still further.

At the CML, the TPAs within our new membership category are:

When a TPA delivers a service to customers on behalf of a lender it will often be "white-labelled." From the customer's point of view, the contact is, to all intents and purposes, with the lender. This requires lenders to have a high degree of confidence in the service offered by the TPA, effectively allowing the TPA to operate under the lender’s brand and reputation. The professionalism of TPAs is also indicated by the FCA's authorisation requirements.

Recognising all of this, the new category of membership category is timely. We look forward to a long and productive relationship with our TPA members.