MCCB voices concern over clarity in sales process

The Mortgage Code Compliance Board released its response to the FSA&#39s Consultation Paper 146 yesterday, outlining the proposed approach to regulating mortgage sales.

Drawing on its regulatory experience, the Mortgage Board has reviewed CP146, highlighting areas which it feels deserve comment. The Mortgage Board&#39s chief concern centres on the proposed introduction of a new level of service, “non advised sales using filtering questions”, which it fears could be perceived by consumers as offering some form of recommendation or guidance.

The Mortgage Board&#39s experience suggests consumers are often unsure as to whether they have received advice or information, and the Board believes that in the interests of consumer clarity, there should be a clear distinction between advised sales and non-advised sales – something that could be undermined by the use of filtering questions in a &#39non-advice&#39 sale.

The MCCB also suggests the proposed Pre-Application Illustration (PAI) should include a requirement for full disclosure of fees, commissions and other inducements which might be an influencing factor in directing the consumer to a particular product.

The body adds that the FSA&#39s definition of &#39Independent&#39 should have the same meaning across the financial services market and the phrase &#39whole of market&#39 in relation to research/sourcing should be dropped as potentially misleading. Firms providing advice should also be required to provide &#39reasons why&#39 letters, indicating to the consumer the reasons why the recommendation was made.

Though a useful way of providing comparative mortgage information, the PAI is not an adequate substitute for written confirmation of the reasons for the recommendation in the MCCB&#39s opinion.

Despite these criticisms, the Mortgage Board welcomes the FSA&#39s proposal to introduce transitional arrangements for those individuals who have met its own Fitness & Competence Requirements and give &#39due credit&#39 to firms of &#39good standing&#39 registered with MCCB.

Luke March, chief executive of the Mortgage Board, says: “We support the Government&#39s clear direction on the future regulation of the mortgage industry and welcome the opportunity to contribute from our own regulatory experience to the FSA&#39s consultation exercise on CP146.

“It is very important that customers clearly understand how the mortgage sales process works and the nature of the service (whether information or advice) which they have received, as this may affect their rights to obtain redress in the event of any future complaint.