FCA director of mortgage and consumer lending Linda Woodall, (pictured) speaking to the annual Council of Mortgage Lenders conference in London, said lenders should not be able to make sweeping changes to product criteria solely to address reasons like poor sales.
Firms should also be vigilant over which products are being given to which customers to prevent abuse of certain products, citing the widespread use of self-certification in the past.
“Good practice could be where a firm designs a product for a specific target market and has a process in place to monitor sales are made to the right types of customers and takes action where this is not the case,” she said.
“Poor practice may be where a firm is not achieving the desired sales volumes and so widens the target audience, extends the distribution and increases incentives without thought for the impact on its customers.”
Mortgage Solutions reported in September the FCA was looking to be involved earlier in the product creation cycle so it could intervene when it feels products are unsuitable.
Woodall said the regulator is also looking to turn its focus away from just compliance staff and interact with other staff members.
“In assessing culture we will look closely at governance. Good governance will mean the right information filters up and down at the right time, poor governance will foster a culture where bad news is kept under wraps and the firm in question can’t learn from its mistakes.
“Overall, we’ll be looking at how a board behaves in applying and adopting customer and market focused values. Our interactions with firms will reflect this focus on business model, strategy, culture and governance.
“First and foremost our starting point will be to focus on a firm’s business model and strategy. We expect firms to look at their own business models and strategies to see if they can truly say that they are considering customer outcomes equally alongside commercial objectives.”
