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Brokers must reveal proc fee details under new EU rules

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  • 02/10/2013
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Brokers must reveal proc fee details under new EU rules
Mortgage brokers will be forced to offer details of all their procuration fees to clients under new EU mortgage rules, the Financial Conduct Authority has stated.

Addressing brokers and lenders at the Financial Serices Expo in London, the FCA’s Lynda Blackwell said brokers who received proc fees would have to offer clients details of all payments they could receive if asked.

“If brokers are remunerated by commission you need to have available a list of what commission you can earn across the market. The customer will be able to know, if they want to, whether you have sold them a product because of the commission you are earning on it.

“You don’t need to give details to the customer but you have to tell them they are entitled to it and, if they ask for it, you must be in a position to give them it.

Considering how brokers would be able to compile such information she said: “It’s the sort of information that sourcing systems will have so maybe there’s a solution there. We are hoping we can work together with the market to form of pragmatic and sensible approach to this.”

Blackwell later confirmed the FCA will consult with the industry on the implementation of the incoming European Mortgage Credit Directive.

The directive is likely to be passed by the end of the year and has already come under fire for plans to force lenders to display a ‘worst case’ APR on all mortgage literature, highlighting the highest rate the mortgage has been in the past two decades.

Blackwell also highlighted how the directive would force an increase in the small print displayed on mortgage advertising but how lenders would no longer be obliged to display any risk warnings to consumers.

She also outlined how mortgage offers would be immediately binding under the new rules, which is likely to see brokers forced to provide more information to lenders during the sales process.

Consumers will also be allowed a seven day cooling off period either immediately before or after the contract any mortgage contract is signed.

Mortgage Solutions reported yesterday the regulator is also planning a consultation on mortgage contract small print following recent controversies involving the Bank of Ireland and West Brom Building Society.

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