The regulator repeated its warning over linking commission with the volume or type of products being sold by advisers during a presentation which outlined the changes facing the second-charge market under the MCD.
Speaking at the Financial Services Expo in Manchester, Keith Hale, mortgage technical specialist at the FCA, said: “The directive has a new standard which is about remuneration policies not being contingent on a given number of loans being sold or a particular type of loan being sold. I don’t know how you currently decide to remunerate your staff but what we are talking about here is the MCD frowning upon sales targets.”
Hale said the directive does not rule out rewarding sales but it shouldn’t be triggered by volume targets.
“You can have remuneration per loan but as to a particular target the adviser has to meet, then that is frowned upon under the new regulation.”
In the question and answer session which followed, Hale was challenged on his use of the phrase ‘frowned upon’, and whether this meant linking remuneration to the volume of sales or product type could still go on if firms failed to heed the warning.
“I was definitely being overfriendly there, frowned upon means the directive bans it,” said Hale.
Volume-linked commission is already banned in the first-charge market under the MCOB rules. MCOB prohibits volume overrides, the industry term for linking proc fees to the number of cases submitted by a broker to a lender.
In the second-charge market lenders are advised against the practice under guidance in CONC, the Consumer Credit sourcebook, leaving room for some firms to continue making the payments.
In August last year, Mortgage Solutions was made aware that volume overrides were still being paid by lenders to master brokers, however, none of the brokers were prepared to name and shame the lender using a ‘loyalty bonus’ commission scheme.
