Well done to AMI for taking up CCL challenge but why has it come to this?
I was interested to read your story last week that broker trade body the Association of Mortgage Intermediaries is lobbying the FCA to amend the new consumer credit license rules for mortgage intermediaries.
Well done again to AMI and its chief executive Robert Sinclair for taking up this challenge but seriously, how can this have been made so complicated (and costly) by the OFT and the FCA?
It has got to the point where not even the FCA knows what we do and it cannot even answer the simplest of questions.
As well as the action taken by AMI we also need to start lobbying our MPs.
I’ve paid the discounted fee for the interim permissions – Hobson’s choice really, there was only one option.
Next, my CCL is due for renewal in January 2014 at a cost of £1,466 which I am lead to believe I have to have to cover the period between licence expiry and April Fools Day despite said interim permissions. Is this the case and if so will I be rebated the unused portion of the £1466 cost of the unused four years nine months?
Answers on a postcard, please.
Consumer credit is about permission, not licensing
My understanding is that if you carry out activities governed by the Consumer Credit Act 1974, you currently need a licence, issued by the the Office of Fair Trading.
From 1 April, the FCA will take over responsibility for this. It doesn’t issue licences, it grants permissions.
It therefore follows that firms will need permission from the FCA, rather than a licence from the OFT, if they want to continue consumer credit activities from 1 April. So it a firm already has permission from the FCA (in effect if is already directly authorised) it simply needs to ask for the permission to be added.
However, according to Section 146 (5A) to (5D) of the Consumer Credit Act 1974, activities regulated by the Financial Services and Markets Act 2000 are exempt from the Consumer Credit Act. This is reinforced by Section 16 of the 1974 Act.
It therefore seems to follow that a firm which confines itself to activities covered by FSMA do not require a licence from the OFT now and will not need to vary their permissions from April.
Buy-to-let is not regulated under FSMA but Section 16C of the Consumer Credit Act 1974 specifically exempts them too.
We bit the bullet over CCL fee ‘grey areas’ but no more
The lead story and letter in last week’s Mortgage Strategy was on the new consumer credit license charges, but more needs to be done on this topic.
Your letter contributor assumes that his mortgage proc fee income counts towards the CCL fee band but this doesn’t seem right.
Mortgage advice sat outside the Office of Fair Trading’s remit as it was an FSA regulated activity.
Standard mortgage and general insurance advisors like myself held CCLs to coverbuy-to-let sales primarily and for the very rare occasion where our activities might stray into CCL territory.
These grey areas were things like consolidating an unsecured credit commitment into a residential mortgage, assisting a client in financial difficulties to contact their lender and agree a repayment plan and a few other very rare examples.
When a CCL cost under £50, this wasn’t an issue.
When it went to £1000 (although a single advisor firm, we are also estate agents and therefore a LTD company) we questioned the need for us to have a CCL with the OFT but no clear instruction was forthcoming. As a result we bit that particular bullet and paid up.
I asked the question again when interim permission raised its head and, again in the absence of any clear advice from the FCA, I bit the bullet again at £280.
I dread to think what the new fees will be but, by my calculations, the income derived from buy-to-let proc fees could be less than £5,000 per year and yet I could end up paying the same fees as someone earning £50,000.
Actually, on a separate matter, as an estate agent, if I make no up front charges to cover marketing outlays and only charge on completed sale, am I offering a credit service and therefore in need of a CCL?
Someone in the industry must know the answer to these basic questions.
Given the FCA, FOS and Financial Services Compensation Scheme fees that we already pay for being regulated surely we should not be charged significant additional fees for CCL which at its heart is about regulating the previously unregulated unsecured lending sector?
John Grant ltd
Equity release £1bn mark breached again this year
As the generation of baby boomers enters retirement, when I consider the sheer volume of market commentary I find myself asking – has there ever been such a focus on the wants and needs of those reaching this milestone?
While later life advice remains something of a specialist niche, I suspect more and more advisers will be looking at the services they offer and wondering how they can tailor them to those in or reaching retirement.
From the advice services available, equity release often remains overlooked even though it does now appear accepted by most practitioners that it is going to be an increasingly in-demand product proposition. The demand drivers for equity release are plentiful and you do not have to be a genius to work out that a growing older population which is living longer, coupled with smaller pension pots, low annuity rates, decreasing State support, long-term care fee needs etc, is going to need a solution in order to maintain lifestyle choices and income levels.
The years post-Credit Crunch saw the volume of equity release sales decline, however 2013 looks like it is going to be a much more positive year with the £1 billion mark breached again. With the recent news of a new provider, Pure Retirement, entering the lifetime mortgage market from next year – the first new operator since 2010 – it seems that now might be a good time to consider how you might support your changing customer needs.
Competition in this marketplace can only be a good thing and this new launch might well be the catalyst for a number of new players to look at offering a similar proposition, all keen to and willing to support your requirements.
At the end of the day advisers in this sector need a range of product options (and genuinely innovative providers) in order to make their customer base as far-reaching as possible. I sense this is what is happening in equity release, including providing options for those customers with interest-only mortgages coming to an end and a much more flexible, bespoke approach to releasing equity.
If 2013 showed the growing strength of the equity release market then 2014 may well be the year to take it into the mainstream consciousness.
Paradigm Mortgage Services
It’s not the payday product but lack of due diligence…
With regards Mortgage Strategy’s poll that was used by the BBC’s Newsnight for its investigation into the payday loans sector, I’m not certain that the core “product” is the problem.
Earlier this month, Mortgage Strategy asked brokers: “Have you had a client with a payday loan who has been turned down for a mortgage in the past year?”.
Amazingly, a massive 63.6 per cent of the 289 respondents – 184 brokers – replied ‘yes’.
But I would argue the real problem is the lack of diligence in checking the ability of those who take out the loans to pay them back in the timeframe set out.
The typical customer of the likes of Wonga is likely someone who cannot get credit elsewhere.
If even one of the high interest credit cards is out of reach then they will likely have either a very poor credit history or a low or unstable disposable income, possibly both.
This adds up to being the sort of application which should be subject to the decision of an underwriter with the applicant having to prove their ability to repay.
I very much doubt that this happens with any of the payday loan companies, who likely as not make more profit from defaulters. That said, this is a two way street, and there has to be an element of responsibility on the borrower’s part too. Stopping the ads might help, as might a statutory cooling-off period in any loan contract.