FSA rehashing old MCCB ideas, says CML
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The Council of Mortgage Lenders has accused the Financial Services Authority of going back in time and reworking old ideas from the Mortgage Code Compliance Board.
The old self-regulatory body the MCCB was axed in 2004 when the UK mortgage industry came under the umbrella of the FSA.
But in an unbylined article in the CML’s latest News & Views titled “Weren’t we better off with the Mortgage Code?”, the lender trade body suggests that someone over at Canary Wharf has been taking a sneaky peek at a dog-eared version of the old MCCB code.
It says: “have you noticed how eerily similar some of the FSA’s new proposals are to the old self-regulatory regime – albeit dressed up with a great deal more complexity and a huge dollop of “regulator speak”?”
Alongside its Code, the MCCB also published a leaflet called You and Your Mortgage.
The CML describes this as a sort of precursor to the unlamented information disclosure document but a rather more user-friendly one.
It says: “While some lenders or intermediaries may mourn the FSA’s proposed demise for the IDD, it might have been a lot more popular if it had looked a bit more like the You and Your Mortgage leaflet.
“But instead of a concise document like that, the FSA published, with the onset of statutory regulation in 2004, the Mortgage Conduct of Business requirements, running for more than 300 pages.”
It says despite its lobbying for the reasons why” letter to be incorporated into the new statutory regime, the FSA rejected this element of the Code.
The CML has also criticsed the FSA’s proposals for who is responsible for affordability.
It says the old code made it quite clear that it was already an embedded principle for lenders to check affordability and take responsibility for doing so.
The CML says the only significant reason it lobbied for statutory regulation in 2004 was because a tiny number of lenders did not subscribe to the Mortgage Code.
But it says: “What happened, of course, was that the FSA re-invented regulation and put in more cumbersome rules – and more of them – so increasing the likelihood of inadvertent non-compliance. Then, in apparent conflict with the thrust of a detailed rulebook, it tried to superimpose principles-based regulation through Treating Customers Fairly.”
The FSA estimated before statutory regulation came in that one-off set-up costs would total £136m and £83m for lenders, with annual costs of just under £68m.
The CML says in reality, however, the transitional costs were well over double the original estimate. And in 2008/09 the FSA’s retail markets business unit spent around £160m.
It says: “Clearly, not all of this spending was mortgage-related, but however you look at it, it is a huge uplift in regulatory costs, compared to the Mortgage Code Compliance Board’s operating budget of £5m in 2003/4.
“For that sum, subscribing members were vetted, registered, audited for compliance, mystery-shopped, and – yes – in some cases, fined.”
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Readers' comments (9)
Tony Joannou | 8 Dec 2009 12:11 pm
What have we been saying all along. The FSA moving to regulate mortgages was a complete waste of time and more importantly money. Both consumers and the finance sector would have been better off without the FSA. Isn't it time the Tories took this on board when they scrap the FSA and go back to somthing similat to the MCCB even if membership is compulsory.
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Anonymous | 8 Dec 2009 12:35 pm
I agree with Tonys' comments as it seems the FSAs' right hand does not know what the left hand is doing. RDR is also a complete waste of time and effort. I think its also all to easy for clients to blame brokers and banks for informed decisions they are making. The FSA also agrees with these clients as they cannot be seen to be doing anything wrong. I think the FSAs' role is now a farce.
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Peter Yates | 8 Dec 2009 12:54 pm
Personally, I thought the MCCB was excellent- the 'rules' were easy to understand and I knew exactly what I had to do. What's wrong with being prescriptive anyway? Their fees were reasonable and I felt I was getting good value for the service I was getting, the total opposite of my feelings towards the FSA's.
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Michael Norwood | 8 Dec 2009 1:07 pm
Well the CML have only themselves to blame -the FSA did not want to regualte mortgages to start with and it was only at the last minute,at their behest,that mortgages came under the FSA's remit.With a huge amount of money spent,and at great cost to individual borrowers,can we really say it has been worth it? There has not really been any cost benefit analysis of most regulation.It would be very interesting to see whether we'd have been better off with a tigher self regulation set up.
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Michael White CEO Email mortgages | 8 Dec 2009 1:46 pm
Surprise, surprise…..So the ‘King’ really has no clothes!
As you will recall, in the fable of the 'Emperor's New Clothes', a couple of con men convinced the king that they had magical cloth, which only the wise could see.
Well, the CML are certainly unable to see the FSA magic and I consider many would agree with such conclusion.
In the parable, being discovered to be naked in public was embarrassing enough but when that small child brought down the veil of denial an even worse fate befell the king. Every one knew their leader was a fool! For now all the kings' men, all the kings’ subjects knew their King was a dunce! Mmmmmm.
But back to the real world, to now stand accused of blatant plagiarism but with the nasty twist of added complexity to shroud the deception and huge additional cost, certainly requires intervention at the highest level; but this appears unlikely before the next election...a shame in every sense of the word.
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Anonymous | 8 Dec 2009 3:06 pm
There was no need for FSA Regulation. With MCCB the rules were easy to understand unlike the FSA's 'legal jargon'and above all if you ever needed guidance on something you could call the MCCB and they would help you rather than you go down the garden path with something that could be open to misinterpretation whereas if you call the FSA all they do is refer you to the legally worded Handbook with no guidance and you do what you think is right then end up in trouble when they visit you, something that could have been avoided. Also you are dealing with FSA staff that all have different interpretrations of the handbook as they dont understand it themselves eg we had a visit and operated in the same manner as other Brokers we know that also had vists and different conclusions to processes were given by different FSA staff something that would not have happened with MCCB. Also they keep going on about scripts for Non Advised Sales. Why on earth do you need scripts. You dont have to read a script to justify Non Advice as we know from the days of MCCB. Just ensure the client acknowledges it and the paperwork is clear that Advice has not been given. All the FSA has done here is make us look like little children reading from a script!!! We get no help from FSA other that heavy handed treatment when they visit
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Miguel | 8 Dec 2009 4:15 pm
This is not surprising news, I doubt if anybody at the benighted FSA ever had an original idea in their lives. The FSA is useless and exists,like all bureaucracies, only to perpetuate itself and the ridiculously high salaries that it enjoys.
It makes life a misery for the small man and cosies up to the big boys. The latter activity is helpful in ensuring alternative employment The sooner these interfering, useless pen pushers are disbanded the better.Until they are sent packing you may expect further interference, useless box ticking, and rehashing of previous supervision dressed up as new "initiatives|".
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Michael B Gillis | 8 Dec 2009 4:22 pm
This may be considered unpalatble to some (or many) but if the present Labour Administration were to resurrect the MCCB or similar or at least bring back self regulation, then I might (but only might) vote for them at the next election. The MCCB worked and I am quite sure our industry would not be in such a sorry state now if we still had it.
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Neil Bates | 10 Dec 2009 2:01 pm
The problem is that the FSA's remit was never to keep things simple.
Any organisation such as the FSA will make things as complicated as possible:
1. Because complexity means more Budget
2. Because complexity means more staff and a bigger empire
3. Bigger budget and bigger empire justifies larger wages and 'Bonuses'
If the govenment wants to reduce its expenditure, they should start with the FSA. Give them a smaller budget and instruct them to regulate mortgages etc within that budget.
It would have been far simpler if the Govenment had made membership of the MCCB compulsory and then say just doubled the budget to allow them to have a slightly more robust process.
The Labour government has reduced what was a leading brokerage and mortgage industry to its knees.
I applaud having consumer protection and the ability to remove dishonest players from the marketplace, however simple rules such as 'you will not submit fraudulent mortgage applications' would have still allowed all the dishonest brokers to be delicenced but without the extra millions being spent for no consumer benefit.
Lets hope that sooner or later 'a' government sees the light and takes a more pregmatic approach to this industry.
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