Lenders should not justify why they decline cases, says FSA
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Lenders should not be required to justify why they decline mortgage applications to brokers, says the Financial Services Authority.
The regulator has today released a consultation paper on financial crime, which includes examples of good and bad practice.
It gives the example of a firm that requires underwriters to justify all declined applications to brokers as bad practice.
This opposes the view of the European Commission which, in its mortgage directive, is calling for all lenders to give detailed reasons for why they have refused a case.
The Council of Mortgage Lenders has argued in the past that if lenders are forced to disclose their reasons for refusing a case where fraud is suspected, it could provide useful information for the fraudster because they could use the information to get around another lender’s system.
It also advises lenders to vet recruitment agencies they use to employ staff and make sure they have the same vetting process for temporary and permanent staff.
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Readers' comments (20)
Douglas Shillinglaw | 22 Jun 2011 12:39 pm
Lenders who decline a mortgage application submitted by a broker should advise us why (except for suspected fraud cases) under TCF rules which the FSA have implemented because it allows us to investigate other lenders whose criteria the client matches & prevents multiple credit scores being done in the hope they may fit a lender's criteria
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Anonymous | 22 Jun 2011 12:41 pm
Lenders fall back on the Data Protection Act, which is fair enough. The Halifax, however, won't even tell the client why they have been turned down, which I believe contravenes the Act quite blatantly. The client has a right to know exactly what information the lender has on the customer, which would cause the decline in the first place; after all, it is quite possible that the information held is incorrect and needs changing! I would love to hear someone from the Halifax justify this.
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Anonymous | 22 Jun 2011 12:48 pm
So what's the difference then between a broker using knowledge of a lender's system to get around the barriers?
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Maurice Edgington | 22 Jun 2011 1:02 pm
I believe this needs some more intelligent thought. If a case is declined because it does not meet criteria it is reasonable to say what part. Whether this is due to credit score, adverse or general non credit reasons. If a fraud case is suspected a lender should issue a refer notice and investigate. A broker may then ask what happens next and the lender may say that the case has been referred and is awaiting further consideration.
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Anonymous | 22 Jun 2011 1:10 pm
Yeah why should they brokers are just dirt on the FSA shoes.
Even after all the regulations over the years the FSA find brokers an uncomefortable group of people. Lets just keep making it more difficult for them to do a professionable service and perhaps they'll all go away.
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Anonymous | 22 Jun 2011 1:13 pm
another case of "back the babk, Sack the IFA"
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Terry Wells | 22 Jun 2011 1:17 pm
Both the broker and the client has the right to know. The client because of the TCF regulations.
As the broker I view my relationship with the lender as a partnership. As such we both should protect each others interests. If there is somthing, possibly unacceptable in the past, or a credit issue,etc. we should be told. as long as it does not fall under tipping off. we can make a decision whether we should continue to deal.
I hate this child-like attude by lenders, "we know, but wont tell you". Lenders need to grow up.
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AJK-Kop | 22 Jun 2011 1:18 pm
O please give me a break- why doesn't the FSA come out with what they really want to happen- ie-take brokers out of the equation and send everyone down the High Street for mortgage (non)advice- stop arseing arond with lame comments and nonsensical rules- End the FSA now!
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john | 22 Jun 2011 1:19 pm
if they dont want to lend then they dont want to lend - simples. as an underwriter you could make up any reason to decline a case - its not rocket science but it likely would ruin any relationship you had with brokers you were dealing with. if the case was a piece of rubbish then the relationship is probably not worth developing anyway.
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Mike The Mortgage Man | 22 Jun 2011 1:50 pm
Fair enough - but never let the FSA say that transparency is important again!!!!!
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