View more on these topics

Borrowers must be responsible too

The Financial Services Authority is getting into its stride. Following a tentative start to its regulation of the mortgage market in 2004, it is beginning to flex its muscles.

Payment protection insurance is its target at present. The FSA recently unveiled a drive against the mis-selling of PPI and over the next six months it plans to carry out checks to improve the sales standards of firms.

Next on the agenda for the regulator is a fresh look at mortgage exit administration fees foll-owing a series of complaints to the Financial Ombudsman Service about the exorbitant exit fees charged by some lenders.

New advice for firms in relation to exit fees is expected shortly. With PPI and exit fees the FSA is focussed on whether consumers have been charged more than they should have been for things of questionable value.

Investigations of this sort are good. I am willing to bet that not every lender and broker in the market is completely blameless when it comes to PPI sales and exit fee pricing, and I support attempts to protect consumers from malpractice. But I’d like to make a general point about responsibility – of course lenders and brokers must act responsibly, but so must consumers.

The vast majority of the consumer finance industry is working hard not only to act responsibly but also to show that it is doing so. Many mortgage lenders will be on the FSA’s list for arrow visits and will at some stage have to demonstrate their compliance to an inspection team. Do consumers have the same attitude towards responsibility? In many cases the answer is no.

Too often, articles appear in which the cases of customers who have failed to read and comprehend perfectly clear elements of loan documentation are blown up into front-page stories in which lenders are vilified.

At some point the lending industry must take a collective stance and face down increasingly scattergun yet damaging criticism in the press. Their stance should be to re-emphasise the principle of caveat emptor. Consumer protection is important but so too is consumer responsibility.

In a recent article I asked whether personal finance skills should be addressed in schools. I’m sure that an increased focus on practical consumer finance in the classroom would benefit future consumers and the industry as a whole by promoting responsible behaviour.

But in the adult consumer population, many lack basic financial awareness such as the ability to understand the concept of interest. While these people need protecting from unsound or unfair financial advice and practice, lenders also need protection from allegations and potentially damaging publicity arising from baseless complaints.

Recommended

Scottish Widows makes key appointment

Scottish Widows has appointed Richard Clark as head of product development and marketing. Clark joins from Sainsbury’s Bank where he was head of marketing communications.Reporting to Graeme Hartop, managing director, he will be responsible for developing the bank’s marketing strategy and have overall responsibility for product design and marketing communications for the bank.Clark has over […]

Take extra care with equity release clients

You only have to look at the financial press to realise that there are a number of product sales that are considered high risk by the industry’s regulators.

Goldman Sachs takes 17% stake in Kensington

Goldman Sachs has snapped up a 17% stake in Kensington Group on behalf of one or more of its clients.The London Stock Exchange made a notification of major interest in shares on January 23, which showed that Goldman Sachs purchased 17% of ordinary shares worth 10p each. However, John Maltby, chief executive officer of Kensington […]

Thumbnail

Neptune video: UK economy: a sustainable recovery?

After years of a slowly brewing economic recovery, the UK has seen a strong rise in growth in recent months. Mark Martin, manager of the Neptune UK Mid Cap Fund, discusses the strength of this recovery and whether it is sustainable.

In the video, Martin addresses the following:

• Structural features supporting the UK economy
• UK mid-caps and the potential for M&A activity
• Valuations and opportunities in house builders