The Council of Mortgage Lenders (CML) has branded the Financial Services Authority’s (FSA) regulatory proposals a ‘bureaucrat’s dream’.
The organisation is now urging the FSA to simplify the steps lenders need to take when monitoring brokers, in its response to CP98.
The proposals require lenders to check the intermediary has provided an accurate pre-application illustration of the mortgage applied for, plus all other illustrations and printed off the necessary documents, including those relating to other lender’s products.
The CML has said these rules are unworkable as they stand and amount to regulation of mortgage advice by the back door. If implemented, the CML believes the requirement would lead to a reduction in the number of mortgage intermediaries. In addition, it says if the pre-application illustration is too long, it runs the risk of not being read by consumers.
Commenting on the proposals, Michael Coogan, director general of the CML, said: ‘What we are ending up with on mortgage regulation is a bureaucrat’s dream. The FSA has been forced to create a cumbersome set of rules as a result of the Treasury’s decision not to regulate intermediaries or advice. Lenders, intermediaries and borrowers alike are left trying to piece together a regulatory jigsaw that is still far from straightforward. We regard it as imperative for the FSA to establish a more practical set of rules on what lenders need to do to meet their regulatory obligations.’
The CML has also asked for the implementation of the rules to be put back to the end of February 2003. Confusion over what the FSA means by the requirement to take ‘reasonable steps’ to ensure intermediary compliance has led the CML to believe a second consultation period is needed.
The CML appears to be in tune with sentiments expressed by lenders. Paul Howard, sales and marketing director of Mortgages plc, said: ‘It needs to be questioned whether we should be examining competitors’ product details in order to ascertain whether we believe the client has been sold the correct product.’
The CML also believes the FSA should be given the power to authorise mortgage intermediaries directly, as the current proposals are a compromise.