Time-warp FSA is rehashing old 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.
Former self-regulatory body the MCCB was axed in 2004 when the industry came under the umbrella of the FSA.
But an anonymous article in the CML’s latest News &; Views newsletter entitled ‘Weren’t we better off with the Mortgage Code?’ suggests that someone over at Canary Wharf has been taking a sneaky peep at a dog-eared version of the MCCB’s Mortgage Code.
The article states: “Have you noticed how similar some of the FSA’s 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 leaflet as a sort of precursor to the unlamented Initial Disclosure Document but a more user-friendly one.
The article continues: “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, with the onset of statutory regulation in 2004 the FSA published the Mortgage Conduct of Business requirements running for more than 300 pages.”
It also says that despite the CML’s lobbying for reasons why letters to be incorporated into the statutory regime the regulator rejected this element of the code.
The industry body has also criticised the regulator’s proposals with regard to which party in the mortgage chain is responsible for affordability.
It says the old MCCB code made it perfectly clear that it was already an embedded principle for lenders to check affordability and take responsibility for doing so.
The CML says the main 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 rule book it tried to superimpose principles-based regulation through the Treating Customers Fairly initiative.”
Before statutory regulation came into force the FSA estimated that one-off set-up costs would total £136m for the industry and £83m for lenders, with annual costs adding up to just under £68m.
But the CML says transitional costs were well over double the FSA’s estimate and in 2008/09 the FSA’s retail markets unit alone spent around £160m.
It says: “Clearly, not all of this spending was mortgage-related but however you look at it, it’s a huge uplift in regulatory costs compared with the MCCB’s budget of £5m in 2003/04.
“For that sum, subscribing members were vetted, registered, audited for compliance, mystery shopped and, yes, in some cases fined.”
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