This paper focuses on the future of advised and non-advised sales, with the FSA suggesting a single approach in relation to both processes that will restrict flexibility and consumer choice.
We understand that all consumers are different, with some requiring more protection than others depending on their financial capability and personal circumstances.
However, if these rules are implemented, it will lead to all mortgages being sold on an advised basis in all but name. This is likely to lead to a decreased perception of responsibility for borrowers as the mortgage sales process is further shifted away from them into the hands of the companies involved.
Higher-risk borrowers tend to recognise their need for advice and take it accordingly.
But the FSA needs to concentrate on capturing the small group of higher-risk borrowers who do not take advice, but would be less likely to default if they did, rather than relying on a one-size-fits-all approach that is likely to create, rather than resolve confusion.
We do believe that sometimes there can be confusion for a consumer as to whether they’ve been given advice or not.
In 2010, along with IMLA and AMI, we produced the “Working Together Guide” which makes clear the roles of and relationship between lenders and intermediaries on mortgage sales and administration.
The guide ensures all those involved know what their responsibilities are and it strengthens consumer confidence in the industry. It is proof that high standards can be achieved by working together and we were disappointed to find no mention of the document in the FSA’s consultation paper.
We do not believe the FSA should rush to implement these rules though.
The cumulative impacts of prudential changes previously made have already addressed the bulk of the problems the FSA is trying to resolve. It would be better to address the issues all together once we know the final rules decided on by all the consultations, including the previous paper on responsible lending (CP 10/16).
As a result of this, we are pushing for the FSA to re-consult on all the MMR policy proposals, along with the draft rules, to guarantee the new regulations are appropriate for the market.
Sue Anderson is head of member and external relations at the CML
