MMR: FSA scraps plans for impaired credit buffer
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The Financial Services Authority has ditched plans to introduce a buffer for borrowers with an impaired credit history.
In its previous consultation paper it had proposed to build a buffer into affordability assessments for impaired credit consumers.
This was to provide an allowance for debts that are under-declared by applicants, particularly those debts that do not show up on credit checks.
But industry feedback to the proposal argued that it would be an inflexible one-size-fits-all approach that would not achieve the goal of consumer protection.
It was also feared that such a measure would significantly reduce the borrowing capacity of credit-impaired consumers.
The industry warned that the net result would be to reduce these borrowers’ access to the marketforcing them to borrow from more expensive sources, such as the high-cost credit sector, and widening financial inequalities.
The FSA agreed and as such is no longer continuing with the proposal.
It says: “We believe that our wider affordability proposals will deal with the biggest issues around impaired credit mortgages, which we believe are largely to do with inadequate assessment of affordability, whether from self-cert mortgages or generally poor affordability assessments applied by many of those lenders who offered mortgages to credit-impaired consumers.”
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