Mortgage firms are concerned that EU legislation due to come in before Brexit is completed could be an unnecessary drain on resources and could put businesses in danger.
A raft of new rules are scheduled to come into effect over the next two years, including the EU General Data Protection Regulations, and brokers have suggested that these could be problematic.
The EU GDPR, set to be applied from May 2018, requires computer systems in different divisions of a company to communicate with each other to help protect customer data and to remove it from an entire database if required.
But John Charcoal senior technical director Ray Boulger says the rules could have unintended consequences.
He says: “While some parts of the rules are good and helpful, other parts are not. I’m concerned that brokers may no longer be able to retain information that could be useful in the event of a future dispute.
“Some of the Mortgage Credit Directive changes are a nonsense and it’s a shame the data protection rules change next year; I don’t think they would have been introduced if we were already out of the EU.”
Brokers say they will still comply with the changes, even if they hope they are revoked in the future but are worried about whether resources will be wasted implementing changes which may be scrapped when Britain leaves the EU.
London & Country associate director David Hollingworth says: “Any change to systems involves time and costs. After going through all that, you don’t really want the rules to be revoked.”
Boulger adds: “It’s a shame to spend money changing systems for things which are not helpful, but we are in the EU and we need to comply.”
Lenders are also facing changes including a requirement to transfer to the European Standardised Information Sheet from the current Key Facts Illustration forms, with a deadline for completion of March 2019.
These will provide additional information to clients such as an annual percentage rate calculation showing the total cost of credit to the consumer. One insider comments that businesses could be tempted to hold off in the hope that the legislation is scrapped, but said this would be a mistake.
The source says: “We will still be in Europe when these rules come in, and even when we leave, the UK is likely to keep its legislation standardised with EU requirements to help trade, whether it’s for financial services or food.”
Hollingworth says: “Most lenders will have a clear plan in place. Some lenders will be further behind than others in this process, but you would have to be pretty brave to wait in the hope that the measures will be scrapped.”
But with less than two years to go, analysis from Mortgage Brain reveals just 17 out of 74 lenders have already made the switch to ESIS.
Among those that have switched already are Paragon, Halifax and Skipton Building Society. Of the 57 which have not, some have moved to a KFI Plus system and have bought themselves an additional two-year grace period to implement ESIS as a result.
KFI Plus introduces many of the measures to mortgage illustrations that are included in ESIS.
Crucially, introducing this system means ESIS doesn’t have to be in place until March 2021. By this time the UK is likely to have left the EU and any further tweaks to legislation should be apparent.A spokesman for Nationwide says: “We switched to KFI Plus rather than ESIS already but we don’t actually know whether any of these rules will still be in place post-Brexit.”
The building society says it is on track to introduce ESIS by the March 2019 deadline.
Yorkshire Building Society says it plans to be ready for ESIS in 2018. A spokesman says: “There have not been any specific changes to mortgage regulation since the UK’s decision to leave the EU so far. We will continue to adhere to requirements outlined by market regulators.”