In years to come we will look at the new regulatory mess we are in and wonder just how things deteriorated to such a level.
The Government’s insistence on putting information at the centre of the mortgage regulatory regime, and not advice, is the fault line that all future woes will flow from. This decision makes a mockery of the consultation process: after all the vast majority of lenders and intermediaries told the Treasury that regulating information would deliver little in terms of reducing potential consumer detriment.
The Regulated Activities Order put into place by the Treasury stuck rigidly to the regulation of information and this was handed to the Financial Services Authority to implement.
The problem is that the FSA lives more in the real world than their colleagues in the Treasury. They know that advisers are a vital part of the market, so they set about trying to ensure that the flawed framework they received was developed into something that provided equal ‘protection’ to advisers’ clients and those borrowers who approach lenders direct. The only possible solution the FSA could see was that lenders should be made responsible for advisers when they issue the statutory information pack.
Although this is understandable it will cause untold grief for lenders, advisers and their clients. It is unrealistic enough to expect lenders to check that an independent intermediary issued a particular piece of paper to an applicant after the event, worse still to check that other information and other lenders’ illustrations were handed over as well. To then contemplate a compliance regime with potentially more than 100 lenders checking up on individuals beggars belief.
There are surely only two sensible routes to follow. We can recognise that information is secondary in the process and simply ensure that consumers get it at the earliest opportunity.
If a new regime really is required, it has to address advice and it has to regulate lenders and advisers on an equal footing. This means that advisers must be authorised directly.
However, someone should be asking questions about value for money. Is the level of consumer detriment in the mortgage market so much that the structural change and cost brought on by this level of regulation is warranted? There is little evidence to suggest that it is.
Will our complaints make any difference? Probably not, but at least nobody will be able to accuse us of not making our position clear.