Vic Jannels, chairman of All Types of Mortgages, says since the start of regulation lenders have attempted to make packagers accept responsibility for ensuring that mortgage brokers are authorised by the Financial Services Authority. However, they are under no obligation to do so.
He says networks are also beginning to renegotiate contracts with distributors that would see them take responsibility for recommending products to clients.
“Networks began by having contracts with whichever packagers their appointed representatives wanted, but now they are reducing the number of packagers they work with. What they are also doing is adding clauses to contracts they have with networks to make them responsible for product recommendations if a client complains that an AR mis-sold to them,” says Jannels.
“There could be packagers in the market that don’t check the contracts they have with networks as thoroughly as we do. It means they could find, too late, that they are tiedin to contracts with these clauses in them,” he adds.
Roger Morris, managing director of EM-Financial, says he is unaware of any networks trying to add such clauses to the contracts they have with his company, but adds: “If a network came to us and asked us to take responsibility for product recommendations, it would disturb me greatly.”
The news follows a suggestion outlined in the Council of Mortgage Lenders’ response to the FSA’s discussion paper on the responsibilities of providers and distributors for the fair treatment of customers.
The CML says the FSA gives no indication as to its expectations of the way in which the relationship between providers and distributors can be proved.
This lack of guidance has meant some lenders have suggested formal contracts between providers and intermediaries as a way of proving the people they work with are in a position to sell their products in a compliant manner. But the CML says this goes against current practice.