View more on these topics

AMI launches sub-prime financial promotions factsheet

The Association of Mortgage Intermediaries has launched a factsheet on financial promotions for sub-prime mortgage products.

It has been designed to give an overview of common errors on sub-prime promotions and how these can be addressed to help create compliant financial promotions.

Earlier this month the FSA published a progress update on its financial promotions work.

The report also included information on the future direction of the regulators work, outlining a number of key areas it would focus on.

One of these was the financial promotions produced by mortgage intermediaries, in particular sub-prime promotions from small broker firms.

In light of the upcoming focus in this area, AMIs factsheet covers the FSAs specific financial promotions requirements and outlines the common errors the regulator has uncovered in sub-prime promotions.

These include omitting or not using a correctly calculated APR plus the APR not being prominent enough; missing risk warnings or risk warnings which were inaccurate or not prominent enough; missing or incorrect fee disclosure information; and a lack of balance promotions listing the benefits but not the potential downsides.

The factsheet therefore covers APR requirements, risk warnings, fee information, prominence, balanced information, the financial promotions approval process and record-keeping.

Also included are examples of compliant sub-prime promotions and a list of areas to consider around the approval process and the use of management information in formulating promotions.

An MCOB 3 Road Map is also included which is a high-level reference list detailing the area intermediaries should refer to when looking for specific rules and guidance.

Rob Griffiths, associate director of AMI, says: The FSAs progress update stressed the need for improvement from mortgage intermediary firms in the standard of their financial promotions, particularly in the sub-prime sector.

It singled out sub-prime financial promotions as potentially targeting more vulnerable customers and therefore felt it needed to focus specifically in this area, especially on those promotions produced by smaller broker firms.

AMI has therefore decided to produce this factsheet to help members with their compliance responsibilities.

The regulator has issued a warning that it will not just focus on repeat offenders but those firms who have failed to grasp, or show awareness, of the rules.

Any firm unsure of the specific sub-prime financial promotions rules should use the factsheet, in conjunction with the rules and guidance, to ensure their promotions are fully compliant and clear, fair and not misleading.

FSA have historically adopted an educational stance in this area but the threat of enforcement action is there for those firms who continue to flout the rules.

Recommended

Are two-hour mortgage completions a good thing for the industry?

Paul Hunt is head of marketing at PlatformIn an increasingly competitive market, speed of service is undoubtedly a critical differentiating factor bet-ween lenders. Instant mortgage offers are already being mooted and in many ways are a natural progression from the online decisions and applications that lenders such as ourselves are offering. A highly frustrating part […]

Halifax says APRs won’t die

Halifax has denied claims that the restructuring of retention fees will make annual percentage rates redundant. Jonathon Cornell, technical director at Hamptons Mortgages, says APRs are the white elephant of the mortgage market, and retention schemes, such as the one Halifax recently launched, will spell the end for them. Cornell says: “In a bid to […]

A&L unveils fast-track guarantee service

Alliance & Leicester Mortgages has launched a fast-track guarantee service for its prime residential mortgage range. The system allows brokers to speed up the mortgage process, bypassing the need for additional paper income verification. It is available to prime residential second-time buyers and also to remortgage customers. To qualify for the fast-track system, clients must […]

Rumbold resigns from Cheval

Paul Rumbold has resigned as sales and operations director at Cheval Property Finance for personal reasons. Ellis Sher, managing director of Cheval, says: “We wish Paul all the best for the future. We understand his desire to be closer to his family in Manchester and while we are sorry to see him go, we are […]

Newsletter

News and expert analysis straight to your inbox

Sign up