The Mortgage Code Compliance Board released its response to the FSA's 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's 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's 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 'non-advice' 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's definition of 'Independent' should have the same meaning across the financial services market and the phrase 'whole of market' in relation to research/sourcing should be dropped as potentially misleading. Firms providing advice should also be required to provide 'reasons why' 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's opinion.
Despite these criticisms, the Mortgage Board welcomes the FSA's proposal to introduce transitional arrangements for those individuals who have met its own Fitness & Competence Requirements and give 'due credit' to firms of 'good standing' registered with MCCB.
Luke March, chief executive of the Mortgage Board, says: “We support the Government's clear direction on the future regulation of the mortgage industry and welcome the opportunity to contribute from our own regulatory experience to the FSA's 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.