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Charging fees to vulnerable borrowers could be banned

Vulnerable borrowers could be left stranded without advice because of a clash between the European mortgage directive and the Mortgage Market Review, the Association of Mortgage Intermediaries warns.

Under the MMR the Financial Services Authority proposes making advice compulsory for certain vulnerable borrowers.

It highlights equity release, sale-and-rent-back, Right-to-Buy and home purchase plan transactions as areas where advice will be mandatory.

But the European directive proposes banning fee charging in areas where advice is compulsory.

This would see fewer brokers advising these customers without the prospect of remuneration.

Robert Sinclair, director of the Association of Mortgage Intermediaries, says: “This is an area where the FSA wants advice to take place so it needs to lobby the European Union harder.”

In its response to the MMR, AMI highlights the clash of interest between European regulators and the FSA.

It states: “Our concern is that it is rightly the FSA’s intention to ensure that certain consumers who are pursuing high risk outcomes need advice. The European Union provision is to prevent vulnerable consumers being charged excessive fees.

“However, we need to ensure that advisers can still be paid reasonably for the work in areas of compulsory advice, as it is essential that these groups benefit from an adviser acting in their best interests.”

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