FSA sees lenders and brokers as drug-dealers
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Speaking at the Council of Mortgage Lenders conference in London today, Matthew Wyles, chairman of the CML says the Financial Services Authority sees mortgage lenders and intermediaries as “the drug-dealers at the school gates” of the mortgage market.
He says the regulator sees consumers as wanton children who have a tendency to want what isn’t necessarily good for them, and for whom Nanny knows best.
He says: “Regulators see lenders and intermediaries as the sweetshop owners – or worse, the drug-dealers at the school gates – of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes.
“But is that really the way that we see the market? It certainly isn’t the way I see it.”
“At the risk of stretching this parental analogy a bit too far, most lenders would prefer not to be cast in a paternalistic role. We do not wish to find ourselves in loco parentis, but allowed to treat our customers as adults, helping them if they need it, but respecting their right to make their own decisions.”
Wyles says the regulator risks creating the kind of moral hazard it wishes to avoid, where consumers feel they need take little or no responsibility for their own financial decisions.
He says: “It should not attempt to wrap consumers in cotton wool and make borrowing risk-free. That is not the nature of lending, and it is not the nature of borrowing. “Arrears” do not automatically equal “detriment” – that would be far too simplistic an analysis.”
Wyles says there will be a group of existing borrowers who will be prevented from taking out a new mortgage with a different lender, or possibly even with their existing lender, in the future and the FSA desn’t seem to mind if these people drop out of the mortgage market.
He also says building societies, in particular, face a future of oppressive regulation compared with other lenders – since the FSA’s prudential sourcebook for building societies effectively condemns many of them to exiting markets with which they are familiar and expert, or adopting lending quotas in anything other than plain vanilla markets that give them even less flexibility than they already have.
He says: “It’s another example of well-intentioned regulation bringing potentially detrimental side-effects, and there is a big need for the FSA to ensure that the level playing field is truly level for all lenders in the future.”
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Readers' comments (21)
Aaron | 13 Nov 2009 11:36 am
Should he really be saying things like that?
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Anonymous | 13 Nov 2009 11:40 am
I havent heard any great concern from the regulator about the potential liquidity crisis that will arise in two or three years time. When the MPC begin squeezing the base rate up, current borrowers enjoying low variable rates and SVR's will return to the market looking for answers. This will mean that lenders without deep pockets will need to increase rates to discourage new business which in turn could generate a second wave of problems and even higher rates. Does anyone see this coming, or am I getting paranoid? S
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Anonymous | 13 Nov 2009 11:41 am
Nanny state beware!
This echoes what will become the new political zeitgeist -
"Stop Treating Children as Adults and Adults as Children".
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Disgruntled Broker | 13 Nov 2009 11:42 am
I wish we had the riches drug-dealers enjoy. Then Mr Wyles comments wouldn't sting so much.
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Anonymous | 13 Nov 2009 11:42 am
Finally, someone has said what everyone else has been thinking. Well done Mr Wyles. More of this please to balance the very one-sdied debate thus far.
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Iain | 13 Nov 2009 11:43 am
Aaron - yes why shouldnt he. It is incomprehensible the stance the FSA takes on many things. Regulation should be there to stop bad practice not overpowering a free market. Building societies suffer from the increased burden thus they are unable to offer the most competitive products. Brokers are constantly suffering at the hands of thhe FSA as they view a few bad apples as spoiling the barrel and want to burn them out. Bad brokers should be banned but the tarring brush should not be used on them all. Is regulation really broken just now, I dont beleive so - thus leave it alone FSA just get the sticky mits away from it.
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Anonymous | 13 Nov 2009 11:45 am
At last, now we know why the FSA are not worried about the demise of so many brokers, the majority of whom value and genuinely care about their clients welfare. The lack of foresight and understanding of human nature is the root of the problem, Light touch regulation of anything is going to allow development of risk taking and abuse, whether drugs or wanton disregard for fiscal control, our economy has been fuelled too long on credit card spending, and it the banks not brokers who created the products, and drove for profits over and above prudence. The failure of the FSA is staring us all in the face, yet they are seeking to shift the blame onto those they were supposed to be regulating.
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Danny Lovey | 13 Nov 2009 11:52 am
Matthew may be not 'politically correct' (good on him) in saying what many of us think.
However, he is right and I am in a state of shock that he is saying it the way it is
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Anonymous | 13 Nov 2009 11:55 am
Assuming the FSA and others exposed to Mr Wyles comments didn't see mortgage lenders and advisors as drug dealers before, he has now created the association in their minds. Although I wholeheartedly agree with the sentiment of what Mr Wyles is saying, I question if he has had any media training to come out with such things. Clever analagy but not helping the ultimate objective I fear.
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Marius | 13 Nov 2009 12:05 pm
Mr Wyles,
my hat goes off to you. You have stood up to the regulator and hit the nail on the head.
Well said and well done to you Sir.
If I see you at a conference or seminar, i will buy you a drink.
p.s. does anyone have any weed on them???
Only joking!
Regards
Marius
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