Fred Crawley asks
whether recent proposals from the BVRLA that leasing brokers
collaborate more closely could lead to problems for smaller


In a job market that has been
virtually dead for the best part of a year, it is notable that two
recruitment consultancies this month made comment to Motor
on the recent increase in brokers phoning in to seek
contact with other brokers.

“They fall into two camps,” said one recruiter.
“Sole traders and smaller outfits looking for larger brokers with
active funding lines, and brokers with active funding lines looking
tentatively for more business, without committing to the overheads
involved in raising headcount.”

The situation is all too familiar by now: Banks
have chosen the introducers they want to work with, and cut
relationships (usually with smaller brokers) in which incoming
business volume could not be seen to justify the overheads involved
in sustaining the link.

Now, it seems, those with funding lines intact are
seeing enough confidence from funders to start looking for extra
business volume, and informal arrangements with frustrated sole
traders looking to place a backlog of deals may be the

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Prue Heron of recruitment firm Commercial Finance
People elaborated: “Some ‘main’ brokers are seeking an upfront fee
to ensure commitment from the smaller broker, and to encourage them
to remain loyal once the upturn arrives. Exclusivity is also
required. In return, as well as a funding line, the smaller broker
can operate under the name of an established firm and receive back
office support in what is a difficult market.”

BVRLA lends support

This recent enthusiasm has also spread to
the broker committee of the BVRLA, which has in the past few weeks
been discussing ways for those vehicle finance brokers left out in
the cold to get a piece of the pie again through broker-to-broker

The committee, representing the association’s 172
broker members, has floated the idea that members in need of
funding (call them group ‘A’), could team up with BVRLA brokers
sitting on good credit lines (group ‘B’), to place deals with the
latter’s funders.

But will funders be happy to take this sort of
business on?

“Funders have traditionally rejected the
broker-to-broker model as they believe the lack of transparency
leads to a greater incidence of fraud,” said Nikki Cann of the
NACFB. “They are not able to carry out their own due diligence on
the originating broker, and this makes them understandably

The BVRLA, however, insists that drumming up
broker-to-broker deals would not introduce less transparency in the
route between funder and customer.

Group B partners, it says, would carry out due
diligence on group A’s deals, with their BVRLA membership on the
line should the introduced business turn out to be less than
honourably sold.

With some large funders such as Lex Autolease only
taking vehicle business through BVRLA brokers, the certification is
demonstrably important. Participating brokers would understandably
be at great pains to ensure the quality of group A business in
order to maintain reputation, while the funders accepting it could
enjoy greater deal volume with little increase in overheads.

Due diligence duty

But the due diligence requirement would
not simply evaporate – it would fall into the hands of the group B
brokers, and presumably cost them the overheads the banks wanted to
avoid in the first place.

If the fact that the commission on the deals would
most likely be split with the group A introducers is taken into
account, it becomes clear that sharing business between brokers
could lead to greater pressure on margins – and perhaps to higher
prices for fleet customers.

The situation would even hold its disadvantages for
the group A brokers – the very firms that it would supposedly be
keeping in business – since it would require them to undergo
forensic analysis by their direct competitors.

When broker-to-broker business does take place in
the wider vehicle and asset finance market, it is often for the
purpose of sharing expertise in a particular area, in order to add
value to deals. For example, a broker specialising in fleets might
ask a broker specialising in crane finance to get involved in a
wider fleet deal which included finance for a crane, along with
funding for more conventional vehicles.

The two brokers in this example would simply
combine their experience in different fields to make a bigger,
better deal.

But in the BVRLA’s membership, the idea would see
desperate firms putting business through direct competitors in the
vehicle finance market – competitors which are presumably larger
and more prosperous and which, given the importance of the due
diligence process, would be scrutinising every aspect of their
introduced business.

Such an arrangement might well throw struggling
brokers a lifeline for the duration of the liquidity drought, but
could put them at a notable disadvantage to their erstwhile
saviours when the cash begins to flow again.

As one broker commented on the subject: “I’m not
sure it wouldn’t be preferable just to go out of business

Certainly there is no question that anything other
than good intentions lie behind the BVRLA proposals – chief
executive John Lewis is well-known for the importance he attaches
to the reputation of his members, and the association is
well-regarded for its best practice standards and effective
representation of the fleet industry. Indeed, even now it is
reviewing its code of conduct to ensure tighter standards in the
ongoing recession.

In any case, the BVRLA does not expect discussions
on the matter to be concluded for several weeks, and it has
declined to comment on the matter until that time – it may be that
any proposal reached takes a form that avoids the problems listed

But until some new ideas on business sharing come
to light, the truth of the matter may be that brokers who have made
it this far into the recession alone may be best advised to keep
their business to themselves.