MMR: FSA may ask lenders for proc fee details
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As part of its Mortgage Market Review the Financial Services Authority is proposing to collect data from lenders, as well as brokers regarding what they are paid in proc fees.
The move is designed to crack down on lenders offering excessively high proc fees for certain products.
The FSA says it has already set out concerns around lenders’ charges and its intention is to carry out further supervisory work into the levels of lender product charges and lender charging models.
It says it also considers that it needs to collect better data from lenders on the fees and charges on an ongoing basis to monitor compliance with its MCOB rules.
It is still considering the most cost-effective way to collect information on charges set by lenders.
It says: “We would like regular information on lenders’ charges and procuration fees and would want to be confident that these reflected actual charging practices.
“In terms of intermediary fees, we currently ask intermediaries to report fee income from regulated mortgages in their six monthly RMAR. It is however difficult to determine with any degree of accuracy what this means on a case-by-case basis. So we are considering asking lenders to supply this data based on the fee income intermediaries quote in the KFI.”
It questions what are the potential compliance costs if the FSA collected better data on fees and charges directly from lenders on an ongoing basis as part of regulatory reporting.
But the regulator says that after undertaking a thorough review of its mortgage regime its analysis so far has not identified a need to apply an Retail Distribution Review approach to mortgage distribution.
The paper says: “Our further work has not suggested a need to apply to the mortgage market the constraints on adviser charging which the RDR requires in relation to investment advice – but we do see merit in aligning with the RDR approach in a number of other areas.”
Readers' comments (8)
Dr David Noble | 19 Oct 2009 10:41 am
Amazing to think that only now are the FSA intending to discover what proc fees are paid,and,why
In my innocence I had assumed this had always been the case!
Perhaps soon we will have an FSA worthy of its name!
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Jerry | 19 Oct 2009 10:44 am
Why are the FSA so obsessed with what a broker earns? It seems that the FSA still have this insulting assumption that advisors recommend a mortgage or protection product based on the commision or proc fee that may be earnt! I would like to ask the FSA is there anything that they have made that are based on monetary income rather than best advice? Fees..... TCF...ETC!
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Gavin White | 19 Oct 2009 10:51 am
I think they will do this through the PSD report as this seems the logical place. We'll wait and see but just a 'heads up'.
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Michael Usher | 19 Oct 2009 11:49 am
i think that the FSA are trying to shut us all down. I am tired of the honest and trustworthy Mortgage Advisers being tarred by the same brush. I really feel that we are on a whole the good guys who are being pushed around. I really do not think that we are being represented well by any of the industry bodies. I think that we should have one true voice who speaks from the heart on behalf of the brokers. At the moment i feel that the FSA and the Lenders are really kicking us while we are down. Absolutely tired of the people who live in cloud cookoo land.
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Steven | 19 Oct 2009 1:40 pm
I thought the point of M Day was to ensure a transparent process between broker and client to ensure that a suitable mortgage was recommended, rather than brokers simply recommending deals that paid them the most. Are the FSA saying that this process has not worked? Given the vastly reduced number of lenders in the current market this scrutiny of proc fees is totally unnecessary as they are all very much the same anyway. Surely once again the FSA is closing the door after the horse has bolted on this issue.
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Iain Stephen | 19 Oct 2009 2:28 pm
Some lenders arrangement fees are outrageous, almost usary, as a percentage of loan. The costs should be a flat fee based the actual cost of arranging the mortgage loan. Their profit is in the rate charged. The banks / credit card firms late fees were ridiculous, not reflecting the cost of sending automated letters and they were curbed.
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Derek Eastern | 19 Oct 2009 2:45 pm
If proc fees are all the same then at least the finger pointing can stop - on that topic at least!
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Jamil | 18 Jan 2011 3:47 pm
"It is still considering the most cost-effective way to collect information on charges set by lenders" proc fees don't change on a daily basis...even a school kid can gather this information..ever heard of mortgage brain? £20pm i'm sure they'll give a discount to the FSA.
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