The EU Distance Marketing of Financial Services Directive (DMD), is set to hit the mortgage market three weeks before Financial Services Authority (FSA) regulation, and create further confusion for brokers and lenders alike.
The Treasury has just opened a three-month consultation on the Directive, set to close on 17 October, in an attempt to make sure the proposals are workable. According to the Treasury, the Directive aims to set common standards for the information that must be supplied to consumers of financial services prior to a contract being concluded at a distance, such as by telephone, internet, fax or e-mail.
A spokesman for the Treasury said: ‘It will mean that businesses would be able to operate on a level playing field and be more proactive in conducting business cross border.’
However, there are a number of things to be ironed out, before it comes into effect according to Chris Cummings, director at the Association of Mortgage Intermediaries (AMI).
He said there were still issues to be resolved including the exact definition of ‘distance’, and who would oversee the Directive’s rules between 9 October 2004, when it comes into effect and 31 October when the FSA will look after it. He commented: ‘AMI believes that the FSA is ideally placed to implement the DMD. The Treasury is already ‘minded’ to let the FSA be the responsible body and to create a separate regulator for such a short time would impose unnecessary costs. We would like re-assurance that if the FSA takes on responsibility for the DMD it will not impede its ability to authorise mortgage intermediaries.’
A spokeswoman for the FSA said it would have to wait and see what its involvement would be in implementing the Directive, and would wait for the Treasury’s decision. She said: ‘It is for the Treasury to decide what will happen between the 9 and 31 October. We have no view on whether ‘ if we are asked to do it ‘ it will be good or bad; we will worry about it if and when it happens.’
Issues over the accuracy of mortgage illustrations as reported in the 14 July issue of Mortgage Solutions, will also have to be resolved under the DMD. The FSA is believed to be looking at a tolerance of up to £1 on quotes received from different sources, although questions remain as to whether this will be enough.