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FCA outlines fees and conduct standards for consumer buy-to-let

by: Samantha Partington
  • 05/02/2015
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FCA outlines fees and conduct standards for consumer buy-to-let
Firms carrying out business which will fall under the newly formed consumer buy-to-let category brought about by the European Mortgage Credit Directive (MCD), will need to register with the FCA from September.

The forewarning comes from the regulator’s consultation paper which is proposing how the business will be managed from the 21 March 2016.

The FCA said it expects that the majority of firms which deal with consumer buy-to-let borrowers will already be registered with them and will hold the necessary permissions.

These firms will be able to go through a streamlined process of registration. But, the small proportion which aren’t, for example new entrants, will be questioned more thoroughly. Firms will be told in Q3 this year how to register.

The fees for registering and the Financial Ombudsman Service levy which firms will have to pay are up for consultation but as a guideline the FCA has proposed a periodic flat fee structure rather than a fee attached to volumes.

Registered brokers could face a periodic fee of £250 while lenders may be charged £500. The FOS levy is expected not to exceed £100 per registered firm.

Borrowers dubbed ‘accidental landlords’ will fall into the consumer category highlighting their need for regulatory protections as it was not their intention to rent out a home they once lived in.

To comply with the MCD this type of lending activity must become regulated.

In its final rules on the legislation which will enshrine the MCD into UK law, the government clarified that if a buy-to-let loan on a property has been bought for business purposes and for the sole purpose of letting it out, it can remain unregulated.

Equally, if the borrower has never lived in it and has a portfolio of properties, this remains unregulated.

Lenders can also confirm a loan is unregulated if the borrower signs a declaration saying they are acting wholly for business purposes and the provider has no reason to think this is incorrect.

Firms which carry out consumer buy-to-let activity will be expected to meet several conduct standards including the obligation to assess the creditworthiness of the borrower but no mention of the assessment of affordability was made.

The consultation, launched today, will run for six weeks. Anyone interested in commenting should send a response by 19 March. Click HERE to send your response.

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