The traditional form of consultation involves those concerned reading the document and feeding back their comments, which the final regulation takes into account, modifies and creates the final rules.
However, the previous FSA ‘consultation had an additional effect: lenders predicted the rules they thought that would make it into regulation and adopted these standards anyway while the consultation process was still happening.
We’ve seen over the last few years, for example, that self cert was not actually banned by the FSA, but was withdrawn by lenders a long time ago in anticipation of rule changes and something similar happened with the restrictions on interest only.
So it is maybe safe to assume that the same will happen again with the new consultation paper, with lenders adopting procedures that they feel are pretty certain to become final rules, given the time and work needed to be put into this process.
It is good to react quickly if this means we stamp out unacceptable practices in the industry rather than wait until the last minute before a formal rule change, but this could also be dangerous. If we adopt rules while the consultation process is still underway and the FSA is still listening to the industry, it means we could end up applying draft standards that never end up becoming final policy as the regulator takes on feedback and rules out different measures as either unworkable, in need of modification or having a detrimental effect on the market.
If this happens again wouldn’t it defeat the point of it being a consultation?
Jon Round is chief executive of First Complete
