Brokers to pay price of FSA fraud clampdown

REGULATOR HIGH NUMBER OF CASES IN SECTOR
REGULATOR HIGH NUMBER OF CASES IN SECTOR

Mortgage fraud has emerged as one of the key factors driving up regulatory fees for mortgage brokers for the next year.

The Financial Services Authority has published a consultation paper outlining the proposed changes to the regulatory fees for 2010/11 that those working in the financial services sector will have to pay.

The regulator wants to impose a minimum £1,000 fee for each firm, regardless of size.

For mortgage brokers, this would increase the amount they have to pay the FSA from £745 to £1,000 – an increase of 34%.

The changes to the fee structure mean that fees will be applied depending on how much business a firm writes, so the FSA says large high street mortgage firms will see the biggest fee hikes.

The regulator’s annual mortgage-related funding costs have risen by £3.5m compared with last year.

The FSA attributes the fee rise to three factors – full regulation of the sale-and-rent-back sector, its ongoing work around the Mortgage Market Review and enforcement costs related to mortgage fraud.

An FSA spokesman says that the level of its enforcement action in tackling mortgage fraud reflects its desire to protect consumers as well as the need to clamp down on brokers who do not have the correct procedures in place.

He says: “If there are a high number of fraud cases in a certain sector it will increase the cost that applies to that sector, and that’s what we’re seeing.”

Richard Morea, technical manager at London & Country, suggests the regulator should raise the level of fines being levied on rogue brokers if it wants to pass on increased enforcement costs.

He says: “It is important that everybody plays their part in funding regulation, particularly with the regulation of rent-back and the work being done to weed out bad apples in the market.

“But the FSA must be careful that it does not burden individuals so much that it starts to force good professionals out of the industry or make it hard for them to continue in it.”

And Andrew Montlake, director of Coreco Group, says: “It seems that brokers are paying an unfair proportion of fees for the sector as a whole – just because you’re a big broker it does not mean you are riskier.

“In fact, larger companies probably have better compliance procedures. Why should compliant firms have to pay more just because they are big?”