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.