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Product transfer sales tactics ‘break MMR rules’

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Lenders’ product transfer sales tactics break Mortgage Market Review rules around non-advised sales and should be reviewed by the Financial Conduct Authority, according to industry experts.

Last week the Association of Mortgage Intermediaries published its quarterly economic bulletin, which called out lenders for potentially causing consumer harm through a lack of transparency around product transfers.

Ami estimates that product transfer gross lending is worth a total of £80bn–£100bn, more than a third of all mortgage lending.

However, lenders refuse to say how much of their books consists of product transfers, and these figures are bundled up with wider remortgaging figures.

Ami says: “Customers face potential detriment as a straightforward product transfer does not always trigger a revaluation, affecting LTV, rate and affordability.

“The ongoing refusal of lenders to disclose the volume of lending done on a product transfer basis is opaque at best and highly questionable at worst.”

John Charcol senior technical director and Ami board member Ray Boulger says the way some lenders promote product transfers risks breaching MMR rules.

He says: “I think the concern is that lenders are effectively circumventing the basis of the MMR by encouraging people to go down the non-advised route and offering them certain incentives on a product transfer. Lenders appear to be trying to get around the rules that the MMR tried to implement.

“The worry that we have at Ami is that lenders are pushing people into taking these deals on a non-advised basis where other factors won’t be taken into account.”

London & Country Mortgages director and Ami chairman Pat Bunton says: “We have a consumer outcome that is diametrically opposed to policy intent.”

TMA Mortgage Club says lenders are increasingly contacting its customers to encourage them to take out a product transfer, often incentivising them by waiving ERCs and offering lower monthly payments.

Bunton adds that consumer awareness of the possible consequences of choosing a product transfer is “incredibly low”.

The Ami bulletin says the issue should be taken up by the FCA as part of its upcoming review into competition in the mortgage market. Ami says: “If regulation encourages shopping around by customers in general insurance and annuity markets, will the market study into competition in the mortgage market ignore or acknowledge the potential customer detriment caused by continuing to allow lenders to bury product transfer lending volumes without full disclosure?”

Bill Warren Compliance managing director Bill Warren agrees the FCA should take up the issue.

He says: “I hope the FCA listens to Ami and the intermediary market, in terms of whether this is doing the right thing. Is simple product transfer treating customers fairly and giving them the best deal? I don’t think it is. It will be in certain cases, but in a lot it won’t.”

Bunton says: “We’ve been pushing to ensure that it is [covered by the FCA].”

An FCA spokeswoman would not comment on the content of the FCA competition review but said the regulator was aware of Ami’s report.

Warren says some lenders are unfairly pushing product transfer deals to their customers.

He adds: “There are a couple of lenders with product transfer schemes which, you could argue, remove any chance of the borrower having a choice in the matter. It’s a matter of fact: ‘You are moving to this rate, you don’t have to do anything, thank you and goodbye.’”

London Money director Martin Stewart says he has not seen examples of lenders pushing product transfer unfairly, but adds: “If you go to a bank, you may be steered in a certain direction when actually there are other offerings available that a broker would be aware of.”

One 77 Mortgages managing director Alastair McKee says the practice of lenders contacting borrowers months ahead of the end of their mortgage can add pressure for customers to choose product transfer. He adds: “If they are not getting advised and the customer is dealing direct with the lender, they are only telling them about their products and not really advising them.”



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  • John Crabtree 13th December 2016 at 3:19 pm

    I suspect Northern Powerhouse does work for a lender as he has clearly missed the point that is being made here. How on earth can you advise a client when the lender is writing to them 6 months early and potentially unraveling the original advice the Broker has given.
    AMI do a fantastic job for the industry and your remarks are not particularly helpful and demonstrate your clear lack of understanding of the advice process.

  • Peter Crowe 9th December 2016 at 2:27 pm

    Northern Powerhouse do you make a full recommendation to your client when the right advice is to remain with their current lender? If yes, and assuming that you keep a fully compliant file to demonstrate this, surely you expect to get paid for the work involved? If no, then are you really doing a good job for your client by leaving them to decide what is the most suitable product for them from the limited list of options that their existing lender has provided?
    Surely hard working brokers shouldn’t feel ashamed to ask for or expect a suitable level of remuneration when all they have is their clients best interests at heart?

  • Graham Lawrenson 7th December 2016 at 3:03 pm

    In reply to the Northern Powerhouse – do you work for a lender? Maybe you work for Santander?

    You seem to be missing the point.

    MMR made provision for lenders to offer advice only on a product transfer. I don’t work for the FCA but I don’t think that they envisaged lenders enticing clients in to an E/O deal by offering them lower rates and waiving ERC’s.

    To me this is a financial promotion, the result of which may be that the client blindly buys a new cheaper rate. To many customers this will seem a good deal until they realise that they are now locked in and subject to ERC for a further period of time.

    I don’t believe that this is in the spirit of MMR and I don’t see how it is beneficial to the customer journey.

    I, like most brokers, often advise a client to remain with a lender. I do this often for no financial reward or I may charge the client a broker fee. Either way I don’t need to chase a proc fee on every deal. The point is that I work with and advise my clients over their lifetime, and indeed go on to advise their children.

    This is the way that you build a long term sustainable business – not by chasing the odd proc fee here and there.

    Maybe the banks could learn how to engender customer loyalty by advising clients rather than just trying to sell them a new rate?

  • Northern Powerhouse 5th December 2016 at 11:15 am

    Of course the bleating of the Ami and its supporters has got nothing to do with them wanting to cash in on procuration fees. In cases where the right advice to the customer is to stay with their current lender, the actual recommendation will of course not be influenced by whether the lender concerned does, or does not pay a procuration fee.