Mortgages may come within compensation scheme

The FSA is considering whether to include firms that advise on or arrange mortgages within the Financial Services Compensation Scheme.

In CP146, the FSA says “the extent of potential detriment to individuals arising from poor mortgage advice is not trivial”.

The FSA seeks comment on the maximum amount of compensation that might apply, and the practicalities of including mortgage advice and arranging within the FSCS.

The FSA sticks by its CP98 conclusion that it would not be “proportionate or cost-effective” to include mortgage lending or administration within the scope of the FSCS.

The FSA says consumer loss may be significant in the case of advice, but potential losses to consumers as a result of lenders failing to provide accurate product information are thought to be limited.

The FSA also confirms that the scope of the Financial Ombudsman Service will be extended at N4 to include currently unauthorised lenders, administrators and intermediaries.