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FCA proposes 7% broker fee hike to foot MCD bill

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  • 05/04/2016
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FCA proposes 7% broker fee hike to foot MCD bill
Mortgage brokers and lenders may be subject to a 7% annual increase in regulatory fees driven up by the cost of implementing the Mortgage Credit Directive (MCD), the regulator has proposed.

The Financial Conduct Authority’s (FCA) fees and levies consultation, which sets out the costings for financial services firms for the year 2016/2017, outlines a need to raise broker fees from £17m last year to £18.2m.

The majority of activity carried out in by residential mortgage brokers falls into fee block A18 which covers home finance providers, advisers and arrangers.

Most other fee blocks for financial services firms will receive a 1.6% decrease in their levy. The regulator said this was because it had ‘re-prioritised, made savings and made a number of operating efficiencies,’ which had allowed it to absorb an increase in costs caused by changes to its regulatory remit.

But, it said that it would not be possible to pass on this decrease to all fee blocks if there was a ‘material’ or ‘one-off’ occurrence in a particular sector.

Robert Sinclair, chief executive of the Association of Mortgage Intermediaries (AMI), said he was struggling to understand why bringing seconds into the mortgage regime was causing such a sharp increase in costs.

“Brokers should get the same 1.6% reduction as everyone else,” said Sinclair. “In a market which is turning over £220bn in regulated mortgages and less than a £1bn in seconds what is it that is causing around a £1.5m annual increase in costs?”

Sinclair said many of the firms providing and advising on second charges were already operating under the mortgage regime.

He added: “The incremental costs do not add up when you consider that the FCA is only adding a few second charge brokers into a system were many of our intermediaries were already offering this type of loan.”

The regulator has proposed to leave the flat fee for operating in the consumer credit market at £300 for firms generating an income of up to £50,000, another fee Sinclair said is excessive.

“Firms which hold full permissions for performing consumer credit business, from April, will have to pay this flat fee but many will not earn any income under this category.” Sinclair said that income derived from second charge business would fall under arranging home finance, A18, while buy-to-let business was unregulated and therefore would not fall under any category. “We think it should be a zero fee for zero income,” he added.

The regulator is proposing that firms authorised to carry out consumer buy-to-let business be charged an annual flat fee of £200.

The consultation closes on 27 May. The FCA declined to comment on its proposals to increase broker fees to cover the cost of MCD implementation.

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