Bill Warren, director of compliance, Complete Mortgage & Loan Services
The panel is chosen by the FSA and it is obliged to consider the representations of the FSCP and give the panel a statement in writing if it disagrees with any of its representations. Along with the other two FSA panels, the FSCP publishes an annual report. This sets out how the panel has fulfilled its functions over the previous 12 months, together with an indication of expected concerns and activities for the following year. This year for the first time, the FSCP structured its report along the same lines as the FSA’s statutory objectives, dividing it into three topics – protecting consumers, promoting customer understanding and developing the right regulatory framework. The panel does not shy away from criticising the FSA’s performance under these headings as well as giving praise in certain areas. What follows are some of its findings in the mortgages and general insurance sector. Under ‘protecting consumers’, the FSCP found the FSA’s performance on self-cert mortgages “weak”, having the view that the regulator did not appreciate the potential risks to consumers in the results of its investigations. Payment protection insurance and financial promotions earned “acceptable” ratings, with calls for the FSA to follow up its work on PPI with further monitoring and actions against firms and to be more stringent in naming the worst offenders when it comes to unacceptable levels of financial promotions non-compliance. Under ‘promoting consumer understanding’ the FSCP rated the FSA’s performance with regard to the disclosure of information on mortgages to consumers as “strong” because it considered the research good and was satisfied with the FSA’s public warning to the industry to improve its practices while also calling for strong follow-up action. In its review of ‘developing the right regulatory framework’, the panel awarded the FSA an “acceptable” rating for its work so far, believing that a good start had been made and expressing its pleasure that there was a commitment to an early review of mortgages. A key point about the terms of reference of the FSCP is that it is independent of the FSA and can speak out publicly on issues when it considers this appropriate. One example of this is research on financial promotions conducted by the FSCP and its public appeal to the FSA to open up its work on financial promotions by naming and shaming firms publishing financial promotions that are falling short of the clear, fair and not misleading requirement. The panel’s research took place on one Saturday in February and reviewed 220 financial promotions in all national and some regional newspapers. Reporting in July, the survey found that 79% of general insurance promotions and 47% of mortgage promotions were non-compliant. Instances of non-compliance included inappropriate abbreviations, illegible small print, failure to provide an APR and failure to provide correct risk warnings for promotions aimed at non-status borrowers. One point in the panel’s press release on the subject will no doubt find agreement within the mortgage industry: “Advertising is at the heart of competitiveness and if some firms are seen to get away with stretching the rules, others will follow.” It is acknowledged that the FSA has no power to name firms unless they are subject to enforcement proceedings but the panel is pushing for the FSA to have the same powers as the Advertising Standards Authority to make public the outcome of complaints regarding financial promotions. If the FSCP is there to raise consumer issues why should mortgage and general insurance firms be interested in what it has to say? Simple. We will be judged on how fairly we are treating our customers and consumers’ views will carry more weight than those of lenders or advisers. Keeping a close eye on the official version of what consumers are thinking could be helpful in making sure that our businesses are conforming to what the regulator expects of us.