Early in the Treasury and FCA consultation processes AMI identified that there was the opportunity to simplify the regime and has been campaigning to secure exemption for mortgage brokers from the consumer credit elements of the new rules, as it saw no consumer or regulatory benefit.
As part of its Consumer Credit final rules the FCA has updated its Perimeter Guidance to provide clear guidance as to what activities will be caught under the regime.
AMI’s long held view, following guidance from OFT, has always been that brokers under the OFT regime should generally have held CCL categories C,D,E and H.
However, it has maintained that these licence categories should not automatically be applied in the same way by the FCA.
The FCA has now confirmed that where a mortgage broker advises the consumer to consolidate any unsecured consumer credit debts into a regulated mortgage contract it will not, under FCA’s regime, be considered as debt counselling.
This is on the proviso that the advice relates to a regulated mortgage contract, rather than standalone debt advice.
Robert Sinclair, chief executive of AMI, said: “We welcome the FCA interpretation of the revised Regulated Activities Order and the clarity that this given mortgage brokers going forwards from 1 April 2014.
“It is important that brokers remember that they will still need to hold a CCL up to 31 March 2014 and that from 1 April 2014 they will be required to hold an interim permission for those consumer credit activities still caught under the regime.
“However, they will now not be required to apply for the costly FCA debt counselling and debt adjusting permissions.
“These permissions will now, rightfully, be left to those debt management firms and debt advisers who undertake these activities as their main source of consumer credit business.
“Second charge brokers will not yet benefit from the exemption as they do not yet advise on regulated mortgage contracts.
“However, the EU Mortgage Credit Directive which was also published at the end of last week means that by 1 April 2016 second charge loans will also become regulated mortgage contracts. Towards the end of the interim regime, second charge brokers will also be able to benefit from this exemption.
“This is a lengthy journey and is likely to require the whole duration of the interim regime, until 1 April 2016, for the benefit to come fully to fruition for mortgage brokers, but FCA’s sensible decision making will benefit brokers, not least from avoiding some of the costly authorisation and periodic fees being applied to the consumer credit regime.”
