EXPO 2009: FSA questions dual pricing

11 November 2009 | By Natalie Thomas

Lesley Titcomb, director of small firms at the FSA, was talking this afternoon at a packed auditorium at the Expo’s AMI Theatre.

While she reiterated that FSA did not expect that lenders have to offer the same product to intermediaries, she says that when a product is so uncompetitively priced through the intermediary, “we do question why lenders would choose to offer the product.”

She says: “Dual pricing is clearly a problem for intermediaries at the moment, but as Robert (Sinclair, director of AMI) pointed out recently in his Mortgage Strategy blog, we can understand why lenders are favouring their own branches in such difficult market conditions, just as we can understand that this makes your job even tougher. They are not obliged to lend through intermediaries. And how they choose to price and distribute their products is up to them.

“I realise this makes life difficult for you, especially when combined with lower levels of activity anyway. But these commercial decisions are not something that the FSA can intervene to stop. However, we do expect lenders to be sensible and act with integrity.

“Where an intermediary product is of such poor value compared to direct product from the same lender, we question why lenders would continue to market that product. And there are some signs that conditions could be improving for intermediaries with a few lenders recently launching exclusive products for intermediaries.”

She also pledged to crack down on large broker commissions and revealed that the regulator was looking to ban the practice of brokers rolling up their fee into the term of the loan.

Titcomb also claimed that the FSA’s proposals on self-cert would not block access to the market for the self-employed and argued that a non-regular income did not mean one that could not be verified.

She says: “Does anyone really think that we really want to stop self-employed people - over three million people - from ever getting a mortgage again? And do we really want to make all lenders ask their customers how much they spend on cigarettes and alcohol? The answer to both of course is no, but you could be fooled into believing otherwise by some of the comments we’ve seen so far.”

She says that the FSA will be working closely with lenders and intermediaries to identify what appropriate forms of income verification are and to define good practice in affordability assessments.

But she rubutted those in the market who have questioned why the market would even need a review in the first place.

She says: “Our existing rules did not do enough to prevent irresponsible lending and borrowing or to secure the fair treatment of borrowers, so we’ve had to look at why that is and in our paper we’ve set out proposals to make improvements.”

On the subject of phoenix firms, Titcomb says that following on from last year’s Mortgage Expo in which she announced plans to toughen up the rules surrounding failing firms who move to a new corporate identity, the regulator received a barrage of intelligence about suspected phoenix firms.

She says: “Our recent work into PPI could mean more firms trying to become Phoenix firms. We are alive to the threat and watching certain firms very closely.”

And on the subject of claims management firms, Titcomb told brokers that if a claims management firm did approach them, they had to be careful.

She says the FSA has seen examples of brokers referring customers to claims firms without asking any questions or proof of any success rate.

Titcomb says: “We expect brokers to act with integrity when referring clients on.”

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