European Commission scraps 10-day cooling off period
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Annik Lambert, secretary general of the European Mortgage Federation, revealed today that the European Commission has scrapped its proposal to have a 10-day cooling period for all mortgage contracts.
Speaking at the infoline Mortgage Strategy and Regulation conference today, Lambert says the proposals will not form part of the EC’s paper it is set to release in March.
Towards the end of 2010 the EC revealed it was considering replacing the Key Facts Illustration with a European Standardised In-formation Sheet which could include a cooling-off period.
Lambert says there are still plans for the ESIS to be introduced but without the cooling-off period.
She also revealed that the paper will contain proposals which will make lenders’ legally obliged to tell a borrower why they have refused them a mortgage and the requirement to refuse them a mortgage if they do not pass a credit and product worthiness assessment.
She told delegates: “The principle could be a problem because it also comes with the obligation to deny credit to the consumer if the outcome of the credit assessment is negative. If it becomes a legal rule it means there is the possibility to sue.
“A lender will also need to explain why it has denied a person credit, this is also considered a problem as it carries a huge risk of increased litigation.
“It could be easy for a borrower to head back to a lender and say “I am defaulting, it was irresponsible lending because I cannot pay the mortgage.”
Lambert says this is something the trade body and the European community considers dangerous.
She says the proposals will not make it compulsory for the lender to offer the customer advice and this will be viewed as a separate product that the borrower should request and pay for.
She also revealed that under the proposals brokers will need to disclose what commission they receive from a lender, but tied agents will be exempt from this rule.
She says in the past the UK was opposed to added regulation, but now it wants the EU to introduce its plans in the hope they will influence the Financial Services Authority.
She says: “Before the crisis the UK was saying it didn’t need any regulation and wanted it watered down, but now they want to see it commissioned because they hope it will influence their own regulator when taking provisions.
“It looks like what is being considered in the UK is much tougher than what is being considered by the EU.”
Lambert told delegates she hoped the FSA would not impose added restrictions on UK lenders that were not being put on European ones.
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