The FSA has gone into overdrive. Over the past two weeks, we have been inundated with press releases, reports and statements from the regulator, which is obviously keen to secure our attention before we are distracted by candy canes, Christmas presents and the old ho ho ho.
The most interesting statement of last week came from Clive Briault, retail managing director at the FSA, who spoke at the Council of Mortgage Lenders’ (CML) conference in London. He urged lenders to protect themselves against a possible worsening of liquidity and credit risks – no surprise there.
More interesting was his urgent message for lenders to take a look at whether they are complying with FSA rules and treating customers fairly (TCF) in their practices for handling mortgage arrears and possessions. He spoke of firms’ unwillingness to consider cases on an individual basis and tailor solutions for individuals.
More thematic work is certainly on the way as the FSA will be visiting firms to study their arrears management practices and see how they are dealing with the principle of TCF. The sense of urgency from the regulator is startling – “clearly this needs to be done as a matter of some urgency before any further increase in arrears rates”. I think it is clear there is going to be a rise in arrears and it appears the FSA thinks so too.
Interestingly, the issue of arrears management was put to delegates at the recent British Mortgage Senate. In a poll of the attendees, the majority of brokers said they would be happy to help clients who are facing debt problems – but only if they were paid to do so. It will be interesting to hear the regulator’s thoughts on this.
The comments that captured my imagination were about the regulator’s concerns that lenders are perceived as being unwilling to share intelligence on rogue broker firms, claiming if it had access to these, its enforcement action could be ramped up. Briault stated one of the reasons only a third of cases brought to its attention resulted in referrals to its enforcement division was because not all lenders allowed the regulator to use the evidence they had collected. The problem, he believes, is lenders are scared of tarnishing their own reputations if they reveal a relationship by association.
If Briault is correct, this is extremely disappointing news. Cowardly, others may say. The issue of reputation has become extremely pertinent of late, particularly following the Northern Rock affair. However, if the regulator cannot work with lenders to ensure a level playing field, we will never be able to weed out those who are determined to not play by the rules.
Sceptics may think this is the regulator lashing out at those who accuse it of being too slow to react and enforce its rules. There was some disappointment, for example, when it was revealed the FSA sub-prime fines instigated last month came after investigations that started over a year ago. Whichever scenario is true, mortgage regulation simply cannot succeed if all parties are unable to work openly and honestly with each other. n
