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FCA’s advice changes in danger of leaving consumers ‘seriously exposed’ – JLM

by: Sebastian Murphy, head of mortgage finance, and Rory Joseph, director of JLM Mortgage Services
  • 20/05/2019
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FCA’s advice changes in danger of leaving consumers ‘seriously exposed’ – JLM
If you’ve read the Mortgages Market Study Final Report and seen regular outpourings around its sandbox then you might well conclude there is no greater technology-obsessive than the Financial Conduct Authority (FCA) itself.


That’s certainly what it feels like at the moment and, as usual, there appear to be plenty of takers when it comes to utilising the FCA’s technology fandom in this area. But, at what cost?

The focus on technology and tools to support consumers securing their mortgage without the need for advice is laced through that Final Report like it was a stick of Blackpool rock.

We’ve yet to understand why the regulator thinks certain consumers don’t need advice but, one thing is certain, it appears to be hell-bent on providing an environment for those technology companies who want to facilitate such activity.


Potential consumer detriment

Indeed, let’s focus purely on the potential for consumer detriment that such tools could deliver.

It appears from the tech-focused missives from the FCA that it is entirely comfortable with large numbers of consumers going through a process which could leave them in a far worse position than when they started.

Let’s not overlook the fact that should they come out with a wholly unsuitable mortgage and sometime later look to who they complain to, they’ll find there is no organisation to complain to – no Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS).

And they have not been provided with any of the protections they would have had if they’d gone to see a professional adviser.

What might the FCA do at this point?

Let’s look for a precedent – the automated sale of payment protection insurance (PPI), for instance. What happened then?

Was it the case that consumers were left to fend for themselves, or was it the case that businesses were found at fault and the consumer secured their compensation in that way?


Where is the consumer win?

It’s not too difficult to see a point where our industry gets clobbered again for instances of consumer detriment which were nothing to do with the advice we provided, and in this particular case were actually facilitated by a regulator all too willing to put access to tools and technology above consumer protection.

How might that play out? Would it feel right?

And if it does not play out like this, and consumers are told they have no protection, then where is the win for them?

Will they be happy to learn from the FCA that the win came in them being able to do it themselves, in accessing mortgage products via technology without advice, even if those products were wholly unsuitable? How many consumers will feel like winners then?


Very dangerous ground

We are on very dangerous ground here – in danger of suggesting that advice is unnecessary when it is anything but.

In danger of throwing consumers into a process which leaves them seriously exposed, just because there might be an online tool available to facilitate this?

The FCA should really go back to basics on this; it should remember that it introduced the Mortgage Market Review (MMR) for very good reasons and not be so swayed by the march of technology, especially when it has the potential to leave so many consumers in a very bad place.


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