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FCA’s proposed broker fee hike receives industry criticism

by: Samantha Partington
  • 26/03/2015
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FCA’s proposed broker fee hike receives industry criticism
The Financial Conduct Authority (FCA) has proposed an increase in fees paid by mortgage brokers of 8.5%, raising concerns from the industry's trade body over the level of financial burden being heaped onto intermediaries.

In its consultation document, the FCA is proposing across-the-board hikes in fees and levies to fund its objectives in 2015/2016 which are projected to cost £481.6m, an increase of £35.2m on 2014/2015.

The regulator wants to raise the minimum fee a firm would pay by 8.4% raising the lowest fee payable from £1,000 to £1,084. Minimum fees haven’t been increased for four years. The FCA said it had frozen the minimum fee initially to shelter small firms from the costs of changes to the now defunct Financial Services Authority in the aftermath of the financial crisis. More recently fees remained frozen pending the outcome of its review into the plans to raise fees.

The FCA said it considered this increase to be ‘proportionate’ and a ‘fair contribution’.

The proportion of firms that are expected to only pay minimum fees is 38%.

But the Association of Mortgage Intermediaries (AMI) has criticised the proposal for the significant increases in costs to firms which it said would be passed on to the consumer.

AMI’s chief executive Robert Sinclair (pictured) said: “Whilst the FCA is headlining an 8.5% increase which is being passed on across the board, this is never quite how it plays out in practice.

“For the small broker who has paid the minimum fee of £1,000 for a number of years this is to be increased to £1,084 and they will also have to pay a new levy to undertake consumer buy-to-let, totalling £350 to include their FOS levy. On top of this, brokers have still to see clarity on whether or not they need a consumer credit permission to talk about some historic loans and mortgages raised for commercial purposes.”

Sinclair said that as well as already receiving interim invoices for the fee increase, mortgage intermediary firms were being sent fee demands from the Financial Services Compensation Scheme for pensions misselling.

“All of this means that the small broker will see their FCA fees rise by over 50% per annum. In a zero inflation world, with government committed to reducing bureaucratic costs, this is a travesty. AMI wants FCA to clearly justify to mortgage brokers the need for such increases when they are carrying on the same business they have always done.

“For larger firms we also expect to see their bills rise by more than the published 8.5%, and we will be monitoring the final numbers in June carefully.”

The minimum application fee for firms applying for new consumer credit activity of advising on regulated credit agreements is £100 paid annually for limited permission, even if they generate no income that year for the activity.

If the firm applies for full permission this rises to £300 per annum. It is thought that a firm will apply for the permission as a contingency in case it needs to carry out the activity.

Intermediaries arranging consumer buy-to-let mortgages will be subject to a fee depending on their level of authorisation. The regulator is proposing a two-tier application fee structure to reflect the lesser amount of work involved in approving firms already authorised by the FCA.

Firms with existing Part 4A or interim consumer credit permissions will be charged £100 while firms without existing FCA permissions or whose consumer buy-to-let registration has previously been revoked will have to pay £500.

Responses to the consultation must be received by 18 May 2015.

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