FSA says there’s more to TCF than following rules

The Financial Services Authority last week admitted that it was possible for a broker to comply with all its rules and still not be treating customers fairly.

Speaking at the Mortgage Summit in Jerez last week Michael Lord, head of mortgage and credit unions at the Financial Services Authority, told delegates: “I accept it is possible for a broker to abide by the detailed rules we have and not be treating customers fairly.”

But he says brokers should focus on the Treating Customers Fairly principle and take into account all factors when advising clients. The FSA is due to release its findings on TCF in mid-July. This will include an analysis of the work it has undertaken over the past 18 months.

Lord says: “This will give us an idea of what we need to work on. Alongside this we will also be issuing a statement about the differences between providers and distributors and where they stand regarding TCF.”

But he adds that there will be no reduction in brokers’ FSA fees until its goals are met. Despite regulation costing firms more and the FSA working more closely with trade bodies, there will no immediate decrease in broker fees.

He says: “This is short-term pay for a long-term goal. We must make sure we have good business practices. Moving to a market that is less regulated would be great and we could cut the fee but a lot needs to be done before that can happen.”

One of the areas the FSA will look at is affordability, and Lord says the impression is that things are not going well.

He says many brokers do not properly advise on affordability to fit people’s income.

More mystery shopping exercises are also on the way to check the quality of advice provided by up to 70 firms.

Lord adds: “We want to take a step back and see what is good and what is bad about the advice being given, looking at things such as the language brokers use and how they explain things.”

Other areas the FSA will focus on in the coming year include networks’ control over their appointed representatives, disclaimer documents, lifetime mortgages, self- cert mortgages and training and competence.