Procuration fees

Definition

Procuration fees, or ‘proc fees’, are payments made by lenders to intermediaries, such as brokers or advisers, for successfully introducing and arranging a loan or finance agreement.

What it means

In the UK finance market, procuration fees are commonly paid in sectors such as commercial mortgages, commercial lending and asset finance. The fee compensates the intermediary for sourcing the borrower, managing the application process and facilitating completion of the transaction.

Procuration fees are typically calculated as a percentage of the loan amount, although fixed fee structures may also apply depending on the lender and product type.

How it works

• A broker introduces a client to a lender
• The lender completes the loan
• The lender pays the broker a procuration fee

For example, if a lender offers a 0.50% procuration fee on a £500,000 commercial loan, the intermediary would receive £2,500 upon completion.

Why procuration fees matter

• Enable brokers to offer services without charging clients directly
• Influence the lender and product selection
• Form a key part of intermediary revenue models

Regulatory considerations in the UK

In regulated markets, such as residential mortgages, procuration fees fall under the oversight of the Financial Conduct Authority. Brokers must disclose how they are remunerated and ensure that recommendations are suitable and in the client’s best interests.

Important to note

While procuration fees are paid by lenders, they may create potential conflicts of interest if not managed transparently. Clear disclosure and compliance with UK regulations are essential.

In short, procuration fees are a standard feature of the UK lending landscape, rewarding intermediaries for successfully arranging finance.