Packagers will have to be authorised under the FSA regulatory regime.
In a letter to the Council of Mortgage Lenders seen by Mortgage Strategy, Eleanor Linton, head of policy and technical standards at the FSA, explains that where third party administrators carry out any pre-sale activity it will be considered to be 'arranging' and an authorised activity.
She writes: “We are aware that many third party administrators also carry on a range of pre-sale activities such as making underwriting decisions and transmitting mortgage offers to the customer (or arranging variations thereof). Our view is that these activities amount to arranging under Article 25A(1) of the Regulated Activity Order and the third party administrator will need to seek authorisation.”
The letter to Kate Main, the CML's senior policy adviser, was in response to queries from the trade body about outsourcing regulated activities.
Linton adds: “The fact that a firm is operating under an outsourcing agreement will not preclude it from requiring authorisation. This flows from section 19 of the FSMA which states that no person may carry on a regulated activity in the UK, or purport to do so, unless he is (a) an authorised person or (b) an exempt person. Otherwise, the consequence of section 19 is that the firm operating under an outsourcing agreement will be breaching the general prohibition and committing a criminal offence and any contracts entered into as a result of the breach would be potentially unenforceable.”
Chris Cummings, director of the Association of Mortgage Intermediaries, says: “It is concerning that this issue has been brought to a head well past the 11th hour. We have always accepted that to be exempt, 'pure' packagers would have no contact with a client. This statement makes it clear that those who have direct client contact or who make underwriting decisions must be authorised.”