In its Mortgage Market Review consultation paper, the FSA said that current rules get in the way of intermediaries advising on direct deals, because they are liable for the accuracy of the KFI that they must produce if they suggest the product.
The FSA has proposed that advisers will not be required to provide a KFI on direct-only deals. Instead, they must keep a record of the recommendation and provide the client with a copy of that record in a durable medium.
The record can take the form of a KFI, but it does not need to be, and advisers will not be responsible for the KFI’s accuracy. The customer should in turn receive a complete and accurate KFI on the deal from the lender.
The points at which KFIs are given are also to be changed in order to reduce customer information overload, ensure maximum impact, and reduce compliance burdens on firms.
However, the FSA said that the form of the KFI will not change. This is because industry and consumer feedback has strongly supported keeping the KFI in its current format as clients value it as a record of their purchase.
As before, KFIs will need to be issued when a firm makes a recommendation to a customer to take out a product.
However, as research has shown consumers do not use the KFI to shop around, firms will not need to provide a KFI on a product that is specific to the amount they wish to borrow.
Instead, advisers will only need to provide a KFI once the customer has indicated a preference for a particular mortgage after the broker has presented the options in a clear manner.
In addition, a KFI will be provided when the consumer asks for one. The FSA will now require firms to inform consumers that they can ask for a KFI to ensure customers are aware of the choice.
An up-to-date KFI will also continue to be issued as part of the offer document.
