FSA denies it is planning cascade system probe

The Financial Services Authority has denied it is planning to investigate cascade systems, but says it continues to watch all as-pects of the mortgage advice process.

Speculation had been rising within the in- dustry that the regulator was looking closely at how lenders’ cascade systems interact with its Treating Customers Fairly initiative.

This follows concerns from all parts of the industry that cascade systems could be misused by lazy brokers.

Michael Clapper, chief executive officer at Enterprise, says: “I have heard whispers that the FSA is looking at cascading and trying to get a better understanding of practices in the market. These systems can be a dangerous way for brokers to get to products easily, and it doesn’t take a genius to see it’s a question of when not if the FSA takes an interest.

“I imagine it will recommend strong measures to prove that brokers aren’t being lazy.”

John Rice, managing director of the Regulatory Alliance of Mortgage Packagers, agrees that cascade systems could be at odds with TCF and that this is a concern for the FSA and the industry alike.

Robin Gordon Walker, spokes-man for the FSA, says: “We are in constant dialogue with intermediaries concerning what we expect and require, including through our suitability of advice rules.

“Firms should follow these whether the business methodology they use involves cascading or not.”

But he adds that although the FSA monitors all the areas it regulates there will not be a full investigation.

Linda Will, managing director of Accord Mortgages, which launched its cascade system at the beginning of the year, says several brokers have expressed concerns to her about lazy brokers using cascading irresponsibly. But she says there are few alternatives left for lenders.

She says: “What would lenders do if they couldn’t cascade? This is a useful tool for brokers.”