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CML fights for non-advised sales in MMR response

The Council of Mortgage Lenders has submitted its response to the Mortgage Market Review, in which it calls for lenders’ call centre staff to be exempt from offering advice.

The trade body says the requirement for lenders to offer advice where there is spoken or interactive dialogue is likely to have a disproportionate impact on lenders’ direct sales channels, particularly telephone and online sales.

It says the proposals will reduce efficiency and increase costs and may result in lenders reducing the amount they can lend.

In its response the CML says: “If the FSA persists with this approach, we suggest that by imposing a process that is developed for face-to-face sales onto remote channels, it will hinder those channels which allow for a relatively easy point of access for new entrants into the mortgage market.

“We are concerned that advice proposals will make it even more challenging for new players to enter the market and thus the end effect will be to restrict competition.

“Those lenders that have chosen not to distribute via intermediaries will be impacted most severely and we think that new entrants looking at offering sales directly to borrowers may find the entry costs significantly increased, particularly if their application was started under the current MCOB regime.”

It adds: “We believe that the basic definition of advice is drawn too widely and needs amendment, if consumers are not to be unnecessarily irritated by a requirement to go through an advice process in circumstances where it may not be necessary to do so.”

It estimates that the average advised sale may take up to 1.7 hours longer than a non-advised equivalent and to maintain their current number of sales some lenders would need a commensurate increase in staff or to readdress their business model by starting to sell mortgages via intermediaries.

The CML says: “This is likely to have a disproportionate impact on lenders that do not distribute via intermediaries and all non-house purchase transactions and variations.”

It also argues that given the breadth and scale of the changes that are being proposed it will be impossible for the majority of lenders to impose the changes in 12 months.


Poor communication is the issue to resolve

I have been asking members which issues most concern them and consistently the response is poor service from lenders in terms of products being pulled or advisers being unable to speak to underwriters.

An ominous sense of déjà vu

The coalition looks all set to reject the lessons of history and repeat its mistakes. Its plan to impose limits on LTVs to curb unsustainable price rises calls to mind the doomed efforts of Harold Wilson’s Labour government to impose lending controls on the mortgage market

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Guide: Johnson Fleming produces auto-enrolment checklist

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  • David Sellenby 2nd April 2012 at 2:34 pm

    Laughable most of these comments. most people arent interested in getting advice – brokers are protesting simply to ensure the process is a complex as is possible – that way they hope to ringfence people and justify their existence. The sooner brokers realise they only exist because there will always be a group of consumers who will use them because they ‘cant be bothered to it themselves’ (that me aswell BTW) the world willbe a better place.

    Also, when whining aboout direct only deals – think about this. Brokers do not attract mr and mrs squeaky clean in the main. As i said earlier you its the ‘i cant be bothered to do it myself’ or those who have an issue with their status. Lenders therefore know that broker deals are more likely to have benn ‘got at’ if you get my drift.As a result, when they have a sexy deal why wouldnt they want to keep it for mr & mrs squeaky clean????? Cant blame ’em can you/

  • Dave Wilkes 31st March 2012 at 4:47 pm

    I am appalled that the majority of new clients I question as to why they have their current mortgage product, whether it has been arranged through a bank or building society reply ‘because it was what I was advised to have’, but further questioning reveals they have no comprehension or understanding as to why it was the most suitable product for their circumstances or aspirations.

    Mortgages should be regulated in the same way as investments, along with the people that arrange them. The majority of mortgage customers see their monthly mortgage payments as their ‘investment’ into bricks & mortar, which will eventually allow them to own their own home. Bearing in mind that for most mortgage customers their monthly mortgage payments are one of their biggest monthly commitments, poor advice can not only lead to them losing the money they have ‘invested’ so far, sounds just like an investment to me, but could also lead to them losing the roof over their head, a risk not necessarily taken by investors unless they are unfortunate enough to have been caught up in recent investment scandals such as endowments. It is about time the banks and building societies were made to assume full responsibility and accountability for the suitability of the mortgage product arranged directly with themselves, for each individual client, especially when, from my experience, the majority of customers leave the branch or the direct sales call centre with the mistaken impression that they have been ‘advised’.

  • Ray Boulger 30th March 2012 at 6:38 pm

    Re Bobby at 1.49.

    If you take the trouble to compare the current draft MMR with the original version I think you would be hard pressed to justify your conclusion, that “the CML has clout” with the FSA but “AMI has none whatsoever.”

    Do you really think that AMI and the CML weren’t both lobbying the FSA hard after the original MMR?

    If the CML’s lobbying had been more successful than AMI’s at that stage why do you think the CML are so unhappy now, whereas AMI is supporting that part of the MMR relating to advice?

  • Mary Lockyer 30th March 2012 at 4:13 pm

    Would it be stating the obvious that allowing the banks to not offer advice as it will cost them more in staffing flies in the face of TCF, sorry the clients are taking on the most important commitment, and the FSA is making it more riskly for the consumer, or have I missed something here.

  • AA 30th March 2012 at 3:48 pm

    Unfortunately for CML, I think this will go through as ‘Affordability’ and ‘Advice’ will need to be carried out. A mortgage is most people’s biggest commitment; therefore lenders and building societies wishing to offer ‘direct’ channels will have to go through the same advice basis and take the necessary qualifications.

    Over the years brokers/intermediaries have always claimed the majority share in the mortgage market. There is a reason for this; it’s because they offer advice; and spending 2/3 hours going through the process has never bothered them. Though it seems to bother CML that spending time with applicants will cost money.

    In light of this, the FSA will stick to the original proposal and implement the change.

  • john smith 30th March 2012 at 2:12 pm

    this has got to be one of the most important decisions the FSA will make in determining the future of us mortgage brokers. if they stand their ground and make the right and proper decision then the future for brokers is looking rosy and many people who turned their backs on the profession will come running back. if lenders were made to give advice the amount of work required to bring their systems and procedures upto date would not be worth the hassle and I’m sure paying the broker a measley 0.35% will all of a sudden look appealing. its game on!

  • Bobby 30th March 2012 at 1:49 pm

    You can bet your last pound that the FSA will backtrack and allow non advised sales to carry on. I am 100% certain of this. Why ? Because the lenders and CML have clout and the brokers and AMI have none whatsoever. The AMI have played the ” nice guy ” role and the FSA have laughed in their faces. The brokers are of no value or consequence to the FSA and the FSa and the lenders want us gone , make no mistake. The corporate golf days and race days with the FSA and the big corporates will not be risked with them sticking to advised sales only. Lets get in the real World here !

  • Luke Atkinson 30th March 2012 at 1:10 pm

    I bet the FSA roll over on this – I wonder how much the CML’s members pay each year in levies?

    Its a shame as it will extend the cowboy information only brigade’s already expired shelf life – both lenders and brokers alike.

  • Kevin Friend 30th March 2012 at 12:49 pm

    This stance by the CML is insensitive at best towards Brokers, many of whom provide good business to all memebers of the CML, valuers, solicitors and yes, lenders too. How can there be one rule for one and not the other? I have listened to arguments where lenders have clearly attempted to hide behing a non-advised sale, albeit, charging fees and giving advice during the sales process. This approach needs to be addressed, memeber of the CML are being misrepresented, I can not belive that they all subscribe to this.

  • not a surprise 30th March 2012 at 12:04 pm

    FSA must not change their intention for compulsory advice, all consumers deserve the protection that the advice process offers.

    Furthermore if lender call centre staff are not able to readily asses a clients options and provide advice then that doesnt say much for them and says alot about the lender.

    It is crystal clear that consumers are served better via intermediaries on many levels.

    If lenders just concentrated on lending money instead of trying to take over insurance and investment chanels the world would be a better place.

    Sorry CML, appears you have a biased view here, and unlike mine its not in favour of the consumer.

  • john smith 30th March 2012 at 12:03 pm

    lets hope the FSA stick to their guns.

  • Maurice Edgington 30th March 2012 at 11:53 am

    I absolutely agree. This approach should also be considered for broking firms. Not all broking firms work on a face to face basis and at the same time may offer only products from a restricted panel of lenders(does anyone actually offer mortgages from every lender?) Customers should be given the right to choose not to be told by the regulator what form of contact they must have. Has everyone forgotten the word option. Give customers the option of and explanation of what advice is and what non advised really is. CML seems to have left this rather late but last minute is better than nothing.

  • GARY 30th March 2012 at 11:50 am

    Lenders will get what they want. It’s only brokers that have no voice, no influence and currently seem to have no value to most lenders.
    I know that some brokers give bad advice or submit fraudulent mortgage applications, but the vast majority of us do not. However this type of bad behaviour is well documented & has/is being addressed. However, we don’t get to hear about the huge number of fraudulent mortgage cases lenders are submitting direct, or the cases where clients are being advised what mortgage products to choose, when they don’t actually give advice.
    The FSA is toothless until it comes to brokers, then it acts like the Kray Twins.

  • Mike Snorkins 30th March 2012 at 11:50 am

    Poor old banks… my heart’s bleeding for them. So, the FSA requirement for qualified advisers means that it will cost them more and take longer – welcome to the real world guys. As for restricting competition, well, there’s still a few 1000 independents available to assist. However, I’m sure the FSA will bend over and take it up the tail-pipe. I hope I’m wrong…

  • Andrew Haynes 30th March 2012 at 11:48 am

    my costs would be dramatically reduced and the saving in processing time would be massive if the sales I transacted didn’t carry an Advised Sale tag. However, as soon as a client asks me the question, why should I? or what is better? then I have to give an advice based answer. Why should this not apply to lenders? Will their staff refuse to answer such questions, explaining that independent advice should be sought? I think not. It’s the same old story, the biggest feet stamp hardest!

  • Hammer69 30th March 2012 at 11:44 am

    Those poor old banks. Fancy asking them to do the job right and take resposibility for the advice they give. So what if it takes longer to complete the sale. Welcome to my world, our sales process has increased ten fold in the last 10 years. It called the CML backing its buddies again. What a bunch of a*se licking wasters they are. Make the banks do their jobs correctly then maybe we won’t have all the complaints they currently receive.

  • Peter 30th March 2012 at 11:42 am

    So they are suggesting that standards should be lowered to allow new players into the market – what a load of rubbish! If they can not achieve a basic entry level of service they should not be allowed into the UK market.
    This is an excuse for existing lenders to carry on offering a below par standard.

  • Phil 30th March 2012 at 11:41 am

    People should always be given advice on a mortgage asince it is normally the biggest financial decision in anyones life along with the life cover attached to it.
    The CML now says: “This is likely to have a disproportionate impact on lenders that do not distribute via intermediaries and all non-house purchase transactions and variations.”
    For years lenders have been underpricing brokers by proceeding on a non advised basis and therefore cutting out the brokers to increase there own profit margins
    All this rule does is make it a level playing field once more and gives the client choice. If the cost to the applicant going direct to the lender or via a broker is the same it then gives him the choice to client to decide rather then entice them with lower rates for non advice
    Is the CML afraid of competition to there memebers?

  • Stuart Duncan 30th March 2012 at 11:41 am

    Well, does that not say several things aboiut the world as it stands today and may appear in the future?

    A client taking on a new mortgage product has a right to an advice option. Is that not what was intended by the original consultations surrounding mortgage regulation in 2004?

    Lenders claim/acknowledge that advised sales take significantly longer and threrefore cost money. Welcome to the real world!

    As for lenders who opt not to distribute through the open market and who wish to keep a cosy arrangement where they can churn out cheap loans by avoiding the responsibility that comes with providing advice, it is about time their smug attitude to the market was challenged and their ability to bribe the consumer away from independent comparison made more costly.

    I long for a properly-functioning market where the public are not penalised for seeking advice and support from their advisers. The pendulum has been allowed to swing far too far in the favour of non-advised sales due to FSA failure to impose even the basic requirements of their own rules and statutory objectives.

    There will no doubt be the odd anonymous objector to comments such as mine, but I have no doubt that these CML objections are profit-orientated with no true concern for the consumer.

  • John Lacy 30th March 2012 at 11:35 am

    If as a broker I have to stand the time and expense of giving advice why should the fat-cat lenders not have to do the same?
    Sorry CML but you’re barking up the wrong tree on this one.

  • Dave 30th March 2012 at 11:35 am

    Lenders are currently asble to use non-qualified staff to sell mortgages.

    A client who visits a branch office will expect to receive advice from a major bank – whatever the paperwork says or they are told – but the lender is using the non-advised rule to avoid their full responsibility.

    It is extremely difficult to perform a proper non-advised sales process, especially in a face-to-face situation and the client will almost certainly perceive that he has been advised.

    This change is long overdue and if it means that banks have to withdraw from direct sales then it will be to the benefit of clients who will receive advice from intermediaries who can source from a wider range of lenders and products.

  • colin 30th March 2012 at 11:31 am

    oh no, we can t possibly have the direct channels accountable for the advice they give can we, it may take the poor lenders staff an extra 1.7 hours to do the job properly and give advice, as opposed here two rates you choose and i ll tick some boxes!!!!!!!!!!!!

    CML brown noosing big lenders again!!!!!!!!!