The regulation phoney war is over

I agree with Isabelle Kassam about Christmas (Mortgage Strategy October 30). So much so that the C word is banned in my house for now.

If a commercial with a Christmas theme appears on TV I change channels. This may have the feel of a throwback to the Soviet era but really, why doesn’t Christmas start in December any more?

One anniversary that came and went recently without much fanfare was that marking the second year since the initiation of statutory mortgage regulation. The lack of publicity surprised me. Is it that we’ve all been too busy in the past two years? Or is it that regulation has become so much a part of our everyday lives that it doesn’t get the prominence it enjoyed 18 months ago?

The answer is probably a mixture of these factors. We all remember that the press agenda was dominated for 12 months before regulation with nothing else.

What is interesting now is that the Financial Services Authority has over the past six months begun to flex its considerable regulatory muscle. Record fines – one of nearly half a million pounds for payment protection sales failures – are a sign of things to come. Industry practitioners should be on notice that the phoney war of regulation is truly over – this regulator has teeth and it not afraid to use them. It may sound trite but that should not come as a surprise to anyone.

Many intermediaries and lenders will have had their first arrow visits from the regulator by now, and for most there will have been no problems. Some have had to make changes to their compliance policies and procedures but there is little evidence of big problems.

In a regulated mortgage world, there are two overriding factors that can prove it is working. These are first that it provides the consumer protection that is essential and second that there is evidence of an increasing level of consumer knowledge about financial products.

From the customer education and knowledge perspective we are working from an extremely low starting point and this objective is one for the longer term.

But one area that must not be overlooked is the cost of regulation and there urgently needs to be some analysis to be done in this area. Prior to regulation the FSA gave an outline cost for regulation. It would be useful if this estimate was revisited and compared against the true costs.

The transition to a regulated world has been pretty smooth, by and large. Have there been a few bumps in the road? You bet there have, but these should have been expected. Before we know it we’ll be hurtling towards the third anniversary of regulation. Another year older and wiser.