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FSA sets out its approach to mortgage regulation

Speaking five weeks after more than 7,000 firms came under the FSA’s mortgage rules, Clive Briault, FSA managing director of retail markets, said the FSAs initial supervisory priorities for the mortgage regime would be policing the perimeter and cracking down on unauthorised firms.

And the FSA will also be looking at financial promotions; product disclosure; lifetime mortgages; regulatory returns; and following up information gained through the authorisation process.

Speaking at the CML annual conference this morning Briault told delegates: “An early priority for us will be to enforce the perimeter of the new mortgage regime and crack down on any firms that are carrying out unauthorised mortgage business.

“In addition we have already started to review a wide variety of financial promotions, and we will focus on making sure that the mass market material distributed by mortgage lenders is clear, fair, balanced and not misleading.

“We will also pay close attention to higher risk areas such as lifetime mortgages, sub-prime lending and debt consolidation. We will be visiting some firms to review their marketing strategies in these product areas.”

The FSA has already begun looking at the product disclosure documentation being produced by the market. It will use mystery shopping to establish whether consumers have access to the documents at the right time.

The FSA will continue to focus on how firms handle mortgage endowment complaints.

Briault said: “In April 2002 we wrote to the CEOs of banks, product providers and IFAs in the mortgage endowment market outlining serious concerns as to the way mortgage endowment complaints were being handled. Since then, most firms have made progress, particularly on the speed of complaint handling.

“But our work has highlighted that there continue to be significant shortcomings in some areas and the FOS is also receiving and upholding a very large number of complaints from the customers of some firms. For our part, addressing these issues and ensuring that firms handle complaints properly is core to our approach to the endowments issue and we are actively pursuing these issues with the firms concerned.”

The speech also recognised the ‘huge task’ of delivering the new mortgage regime and Clive Briault thanked the industry for their work in smoothly bringing in a regime that sets strong standards and will bring real consumer benefits.

Briault went on to say: “We have designed a regime that facilitates a competitive and innovative mortgage market; enables consumers to make better informed decisions and to shop around; enables consumers to receive a good standard of advice on products that should be suitable for their circumstances and needs; protects consumers when they enter into riskier transactions such as lifetime mortgages; requires firms to treat consumers fairly where they fall into arrears or face possession of their property; and provides consumers with access to complaint and compensation schemes.

“Overall we believe that we have introduced a proportionate regime, which sets strong standards in the right areas and thereby brings tangible benefits for consumers.”

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