The Financial Services Authority has been slammed for failing to carry out a detailed audit of the sales and advice process in the retail mortgage sector nearly a year after taking on the responsibility of being the industry’s statutory regulator.
The FSA took charge of policing the entire mortgage industry on November 1 last year but 11 months on, it has still to take a close look at mortgage sales carried out on the high street by lenders such as Halifax, Nationwide, Alliance & Leicester and Abbey.
While the regulator has been busy casting its eye over the intermediary sector – for the most part giving it a clean bill of health – many pundits on both the retail and intermediary sides are now starting to question whether more could be achieved in terms of protecting the consumer from shoddy sales practices if the FSA were to take a closer look at what goes on behind the doors of the well known high street lenders.
So far, the FSA’s focus has been entirely on the intermediary mortgage market, leaving consumers who walk into high street shops at the mercy of the branch staff.
Mortgage advisers in the high street earn as little as 16,000 a year, a fraction of what the majority of good mortgage intermediaries can earn, and so are often forced to boost their salaries by pushing sales of uncompetitive ancillary products such as payment protection insurance or other products linked to the group.
Senior directors of at least two retail lenders, who asked not to be named, say that the majority of branch-based mortgage advisers are perceived as being little more than “cashiers” by both their bosses and the public. The range and quality of advice they can give the average customer is often no more than a hard sell choice of limited products. That not only leaves customers badly advised but also sets them up for financial heartache in the future.
One of the directors says: “It is amazing that after 11 months the FSA has yet to undertake a high level audit of lending through the high street.
For instance, it wouldn’t take long for the regulator to look at the branch level running of any high street lender to realise that there are breaches of MCOB happening every day.”
Robin Gordon-Walker, an FSA spokesman, says: “The FSA has conducted and is conducting a wide range of supervisory and thematic work into the mortgage market this year and will also be undertaking a review, starting at the end of this year, into the effectiveness of the mortgage regulatory regime.”