The FSA proposes to apply the independent and restricted labels to all firms in the mortgage mark
In its consultation paper today it says the concept of independence already exists within MCOB.
As part of this a firm cannot hold itself out as independent unless it enables the consumer to pay a fee for its services, rather than rely upon commission.
It says: “We considered whether we should retain this requirement as part of our new labelling landscape.
“As discussed in the discussion paper, we have not seen significant evidence of commission-bias in the mortgage market.
“Even if there were risks of commission bias, our enhanced sales standards will ensure that a firm only puts forward products on the basis of a consumer’s needs and circumstances.
“Our re-focused disclosure requirements will also require firms to highlight their remuneration including whether they get commission.
“Therefore we do not believe that there is a strong case for retaining the requirement for a fee option in our new independent label.”
Consistent with the approach in the retail investment market, firms who label themselves as independent will have to source products from a ‘comprehensive and fair analysis of the relevant market’.
It says: “We are conscious that in the mortgage market, there are a number of products that cannot be accessed by all firms, or products only available through special deals between particular lenders and intermediaries.
“We propose to specify that a firm’s search does not need to extend to these products in order to use the label ‘independent’.
“In practice, as currently, a firm may use a panel of lenders in meeting the requirement for a comprehensive and fair analysis of the market, but the panel would need to be sufficiently large to ensure it is representative of the range of products available.”
To be independent firms will also be required to offer an unbiased and unrestricted service. This means they should not be bound by any form of agreement with a lender that restricts the service they can provide.
Where a firm does not meet these requirements, it must describe its service as restricted. In doing so, it will need to clarify whether it offers products from just one firm or a limited number of firms, and note any restrictions on the range available.
It also says it does not see any merit in moving to an all-advised market.
It says: “The more proportionate approach is to retain the existing distinction but to apply the same basic sales standards across both advised and non-advised sales.
“From the consumer’s perspective the important outcome is that, so far as possible, they buy a product that is affordable and appropriate for their needs and circumstances. However, firms will be able to continue to differentiate themselves by choosing whether to make a personal recommendation.”