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Redress costs feed fears of non-advised sales ban

Mehrdad Yousefi: Changes will add to time and cost

The regulatory risk of providing advice is the main driver behind lenders fighting a proposed ban on non-advised mortgage sales, Precise Mortgages claims.

The Financial Services Authority proposes the ban in the Mortgage Market Review. It aims to end customer confusion over when they are actually receiving advice.

Alan Cleary, managing director of Precise Mortgages, says that execution-only sales carry no risk of mis-selling to lenders.

He says: “Now there could be advised sales there is a risk that lenders could end up paying redress, which is a big cost and is what is concerning banks.

“The potential regulatory risks can’t even be calculated. Just look at the payment protection insurance mis-selling scandal and endowments.”

Cleary says one of the attractions of using brokers is that lenders can outsource their regulatory risk for selling mortgages.

He says: “It is one of the beauties of using intermediaries because they are the ones authorised to give advice. They train under their own regime and if lenders tap into it they don’t have those costs or issues.”

In its submission to the MMR, the Council of Mortgage Lenders warned that changes to who takes responsibility for mortgage advice could create increased risks for lenders.

The CML suggested that the increased risk could lead lenders to pull out of certain areas it deemed too risky to deal with, affecting a range of customers.

Industry consultant Mehrdad Yousefi says regulatory risk is a concern for lenders but there are other factors to consider too.

He says: “The other issue is the time it takes from application to completion for applicants who know what they are doing and don’t want advice.

“The time and cost associated with these transactions will be higher and overall it costs the industry more money every year.”

Yousefi argues that experienced consumers should not receive advice as they know what they are doing and don’t want to go through the time-consuming process.


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  • Bobby 7th June 2012 at 3:18 pm

    I am fairly sure the FSA will back down on this as they would not want to jeopardise the lunches in Canary Wharf and corporate Golf days with their banking chums. After all, most of them came from the banks anyway.

  • Bobby 7th June 2012 at 3:15 pm

    If we are going to go down Stuart as is looking ever more likely we may as well bring the networks and fsa down with us as collateral damage. Time to REALLY make a stand and stop playing the Gent as it has got us nowhere.

  • Stuart Duncan 7th June 2012 at 1:37 pm

    Bobby – we actually have less right to strike than any other occupation in the country, which is utterly outrageous when this is imposed by a quango and someone whom we pay and does not pay us.

    I agree with the comments above and it is utterly right that providers have made hay with non-advised mortgages and insurance.

    It is simply dishonest for lenders to pretend that their opposition is based on them wanting to protect borrowers who “Know what they want”. The only thing they wish to protect is their profits.

  • Bobby 7th June 2012 at 12:03 pm

    I am proposing if the FSA allows non advised sales to continue that I and all other mortgage brokers refuse to do the compliance work that the FSA and Networks require us to do. If all 8000 brokers did this it would bring the FSA and Networks to its knees in no time at all. What will they do, ban us all ? No they both need our incomes and are leaches on the back of our hard work. It is a farce and should not be allowed to continue and would actually attract publicity and show the general public the complete joke it now is under the FSA. Whose in ?

  • KS 7th June 2012 at 11:05 am

    If they are not giving advice, they are not treating customers fairly, nor are they offering the client value for money. If your not prepared to give advice then they should not be offering any products.

    Take responsability for the products you offer