Customers will pay the price of FSA regulation

From Peter Barwick

I have read the letter from Brian Humphries of 1to1 Mortgages Limited (Mortgage Strategy September 29), and can only agree with his comments.

I am beginning to wonder if FSA regulation is going to go the same way as the life assurance industry, where compliance was introduced in 1987. Life assurance companies were the main architects of this regulation, which was manipulated to the needs of the life assurance industry. This caused a major problem with regard to salesman as many left the industry. Since then life assurers&#39 profits have been down and they have had to consolidate their business by closures and redundancies. This also affected the returns to policyholders.

Mis-selling did take place with pensions and endowments, but not to the level one was led to believe by the press speculation based on figures supplied by insurers. The public was led to believe that it was all the fault of the salespeople, but life assurers failed to mention that these pensions and endowments were sold on expected returns, and the figures for these expected returns were provided by the insurers themselves. They failed to take into account a lowering of returns, and believed that they could justify the growth rates they were quoting for the duration of the policy sold.

The FSA is setting up mortgage regulation as it sees fit. I am concerned it is taking most of its information from lenders, allowing brokers to be manipulated as they were in life insurance. This would be to the benefit of the FSA (for regulation) and the lenders (for streamlining), but not to the broker or customer.

I would like to remind the Association of Mortgage Intermediaries of its remit – lenders already have their own organisation. The aim of AMI should be to protect and argue for the broker, regardless of size, and not for its own agenda. Its inability to make a decision regarding the sale of single premium ASU is not a good start.

I would like to conclude that I cannot see too much wrong with the MCCB in its current format. If the FSA has to take over regulation, why not take a decent running situation and amend as necessary, as regulation takes hold. Who is going to pay for these high regulation costs? It will be customers, the very people that the FSA is supposed to be here to protect.

Peter Barwick

Barwood & Co

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