Lenders should not be required to justify why they decline mortgage applications to brokers, says the Financial Services Authority.
The regulator has today released a consultation paper on financial crime, which includes examples of good and bad practice.
It gives the example of a firm that requires underwriters to justify all declined applications to brokers as bad practice.
This opposes the view of the European Commission which, in its mortgage directive, is calling for all lenders to give detailed reasons for why they have refused a case.
The Council of Mortgage Lenders has argued in the past that if lenders are forced to disclose their reasons for refusing a case where fraud is suspected, it could provide useful information for the fraudster because they could use the information to get around another lender’s system.
It also advises lenders to vet recruitment agencies they use to employ staff and make sure they have the same vetting process for temporary and permanent staff.