AMI director Robert Sinclair says early versions of the European Commission’s directive on credit agreements relating to residential property contained more rules to make consumers responsible for their borrowing than the final version published last month suggested.
He said: “The early versions of this directive had considerably more in them about what consumer responsibility looked like. This has been significantly watered down following pressure from consumer groups over the last few months. I think that’s unfortunate. It’s not in the title of the directive anymore.”
Unlike the Financial Services Authority’s Mortgage Market Review proposals which make lenders solely responsible for mortgage lending and borrowing in the UK, earlier versions of the European directive reportedly looked likely to make consumers shoulder some responsibility for borrowing sensibly – something the UK mortgage industry has been keen to get the FSA to recognise.
Evidence of this remains in the directive. Article 24 refers to the penalty if a consumer knowingly provides false information that skews the creditworthiness assessment but there is no act in the main body of the directive that requires that penalty.
Sinclair said: “We’ve ended up with some very high level statements around the avoidance of fraudulent statements by consumers and very little else. I think that that brings us back to a place where the big onus of responsibility sits with intermediaries and lenders.
“Whilst I can see the logic of it, I don’t think it’s a good balance to ensure consumers fully understand the implications of the transaction they’re entering into.”
Matt Smith, senior policy adviser at the Council of Mortgage Lenders, said: “The recital does broadly discuss that consumers are responsible for their actions and ultimately responsible for their decisions which is a point that the FSA in the MMR has played down, suggesting that consumers need protection from themselves. This difference is entirely welcome.”
