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Business borrowers need fair treatment

My last thoughts on the Mortgage Market Review before we submit our response to the Financial Services Authority concern a niche group that is subject to potentially significant changes – small business borrowers.

When a small business approaches a lender, it will first look at all the borrowing options available before it agrees that a residential mortgage is a suitable choice. The FSA is proposing to carve this out of the MMR as it is a contract between the lender and the business, not the individual.

We agree to some extent. The MMR rules on the sales process should not apply as the individual’s income and expenditure are not relevant, and neither is advice as defined by CP11/31.

But lenders should inform borrowers which regulatory protections they are foregoing and which they will receive. Arrears and repossession protections should apply as they are at risk of losing their residential property.

Also, FSA principles, including Treating Customers Fairly, will still be valid. So borrowers can complain to the Financial Ombudsman Service if they have been treated unfairly or the arrears process has not been adhered to.

Taking out a mortgage on an individual’s property to raise finance for a small business is different to taking out a personal mortgage and the MMR cannot accommodate both without restricting the ability of lenders to transact with such borrowers.

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