Lenders &#39could be vulnerable&#39

The Council of Mortgage Lenders has warned that FSA interpretation of regulations governing mortgage contracts could be costly and leave lenders vulnerable to Ombudsman complaints.

The Unfair Terms in Consumer Contracts regulations were agreed in 1999. They were originally policed by the Office of Fair Trading. But now the FSA will issue guidance on the terms contained in mortgage contracts.

The FSA intends to take a proactive role in interpreting contract terms relating to lending, advising, arranging and administering mortgages.

But the CML warns the FSA not to overstep the limits of regulation and to “steer clear of offering too many opinions”.

Responding to CP148 (The FSA&#39s Approach to the use of its powers under The Unfair Terms in Consumer Contracts Regulations 1999) the CML says: “There is some concern that the FSA approach could become inconsistent if different guidance were to be adopted for different products.”

In such a scenario, the Financial Ombudsman Service could apply guidance to the &#39wrong&#39 product.

The CML says: “It will be important for the FOS to be fully aware of difference in guidance that has been issued for different products.”