The Treasury has confirmed that the current £5 cap on brokerage fees not leading to a mortgage contract will be abolished.
By removing the £5 limit the Treasury acknowledges there are occasions “when the appropriate advice is not to take out a mortgage” and paves the way for brokers to claim fees that reflect this.
The Treasury also says that by carving mortgages out of Section 155 – the consumer credit act clause that directs a £5 cap – regulators will open a way to apply rules in the same spirit in other circumstances.
It says: “If Section 155 is dis-applied, the FSA will be able to make rules that confer in a wider range of circumstances the kind of protection that is afforded by Section 155 in a more limited range of circumstances.”
The Treasury does not elaborate on what these wider circumstances might be.
It says there is no sense in retaining the £5 cap for introductions not leading to a mortgage contract alone, since this would mean “no statutory mechanism of redress, requiring the refunding of fees, for other consumers”.
Reporting on mortgage regulation consultation responses on the £5 limit, the government says there were a “broad range of views”. These included respondents who wanted the £5 cap to remain for consumer protection purposes, others who wanted it increased to reflect the work the brokers put in and those who wanted it abolished altogether.