It argued that the proposed rules are based on the preconception that advice still occurs within the traditional medium of face-to-face advice. However, the CML said it is seeing continuing development and expansion of new channels for telephone and internet advice.
“We believe that the rules need revision if they are not to hamper this important commercial development, which clearly is attractive as an option to many borrowers.”
The trade body has also argued that the FSA’s definition of advice is “too wide” and needs to be amended.
“The requirement to advise whenever there is ‘spoken or interactive dialogue,’ which is likely to have a disproportionate impact on lenders’ direct sales channels and particularly telephone and online sales, is far too wide and needs amendment.”
The trade body added: “If the FSA persists with this approach, we suggest that, by imposing a process that is developed for face-to-face sales onto remote channels, they will hinder those channels which allow for a relatively easy point of access for new entrants into the mortgage market.
“We are concerned that advice proposals will make it even more challenging for new players to enter the market and thus the end effect will be to restrict competition.”
The FSA proposals in CP 11/31 are that all spoken and interactive dialogue between a firm and a borrower must now be an advised sale.
This will apply equally to both new mortgage sales and contract variations for existing borrowers.
The CML added that it is concerned this will create a ‘one-size-fits all’ approach to advice that “does not reflect the different needs of customers” and have a potential impact on lenders’ distribution strategies and business models.
The CML has estimated that the average advised sale may take up to 1.7 hours longer than a non-advised equivalent and to maintain their current number of sales some lenders would need a commensurate increase in staff or to readdress their business model by starting to sell mortgages via intermediaries.
The CML said: “This is likely to have a disproportionate impact on lenders that do not distribute via intermediaries and all non-house purchase transactions and variations.”
The trade body added that implementing the MMR is likely to take 18 months once the proposals are finalised.
