Peter Sowerby, sole broker at Advanced Mortgages and Loans, was told to add the clause ‘Your house may be at risk if you do not keep up repayments’ by his network, Pink Home Loans.
Even though commercial mortgages aren’t regulated by the FSA, because the advert was for qualifying credit it fell under the regulator’s jurisdiction. This meant it had to conform with the FSA’s rules which state that any promotion must provide adequate warnings.
But Sowerby argues that inserting the disclaimer would be misleading for consumers. As a result, he has decided to remove all adverts from his local newspaper rather than publish something that would give customers looking for commercial loans the wrong idea.
Sowerby says: “The repayment warning must be used even though we are talking about commercial mortgages that would not be secured against a home. By including this wording in the advert, all I would be doing is misleading readers so I ditched the advert.”
The FSA’s Mortgage Conduct of Business rules state that promotions must remind readers clearly that “the obligation of the borrower to repay is secured (in whole or in part) on the land”.
Pink says when it comes to compliance with promotions rules it always errs on the side of caution although it regrets that Advanced’s advert falls into what it calls a grey area.
Neil Hall, marketing manager of Pink, says: “Pink always goes for the safe option. The MCOB rules says a fair and clear warning is necessary so we take the safe route and ask all our members to add the ‘house’ clause to their adverts.
“We regret there are always grey areas such as this when it comes to compliance, but it is better to be safe than sorry. With impending Treating Customers Fairly regulation, we hope things like this can be cleared up by the FSA.”
A spokesman for the FSA says: “Every firm or network must know MCOB and obey its rules. It is good to see firms complying with our regulations to the letter.”