Lenders come under FSA fire over fraud

The Financial Services Authority gave lenders a lashing last week over their anti-fraud systems as it published its long-awaited thematic review of lenders’ fraud prevention systems.

Lenders were slammed for not engaging with the regulator’s Information From Lenders scheme to report suspected fraud and the idea of making it compulsory was floated. Underwriting teams were criticised for being underqualified and overstretched, and lenders’ bonus culture was deemed to encourage fraudulent behaviour.

The paper also states that lenders need to improve the supervision of third parties and improve information sharing.

The lengthy list of criticisms could see lenders paying up to £400,000 a year to comply with guidelines set out in the review. The regulator claims the Financial Conduct Authority will be a more probing regulator and will commission more thematic reviews on financial crime.

“A lengthy list of criticisms could see lenders paying £400,000 a year to comply with guidelines in the review”

The FSA’s criticism was served with some praise, however, as it noted systems had improved and defences were stronger. The Council of Mortgage Lenders has pledged to work with the FSA to help lenders get to grips with the changes.

One way lenders could free up more time to concentrate on their anti-fraud initiatives would be to outsource some of their other activities, as Julian Wells, marketing director at HML, says in this issue.

Our cover feature is a round table with some of the finest minds in the lending industry discussing standby servicing. This occurs when lenders enter administration but their legacy mortgage books still need to be serviced.

Meanwhile, John Murray analyses Paragon Mortgages’ managing director John Heron’s comments that a housing crisis is brewing. Murray says buy-to-let landlords have helped price first-time buyers out of the market and calls for an end to taxpayer subsidies in the form of mortgage tax relief and housing benefit.

“A lengthy list of criticisms could see lenders paying £400,000 a year to comply with guidelines in the review”