In its response to the MMR the lender trade body said the definition of advice was too wide and needed amendment.
The requirement to give advice whenever there was "spoken or interactive dialogue" would drag into an advice process many borrowers who did not want or need it, it claimed.
The CML suggested that the Financial Services Authority needs to ensure a consistent approach with the perimeter guidance which allowed dialogue to occur with borrowers without it necessarily being deemed to be advice and amend the proposed rules, which do not.
Also it suggested the regulator needed to ensure that the advice proposals only captured those customer contact activities that will be undertaken by approved persons.
The trade body supported the proposal that where new money was being lent, borrowers were encouraged to receive advice but could opt for execution-only if they want to and the requirement that customers in the four higher-risk borrowing groups should not be able to opt out of advice.
These borrowing groups include equity release, sale and rent back, right to buy, and debt consolidation.
On supervisory uncertainty the CML's concern was that while the responsible lending rules appeared to allow certain flexibility to lenders, it is possible that supervisors may be more prescriptive.
The CML has urged the FSA to ensure that its monitoring, supervision and enforcement are in line with its policy intentions, reducing the risk of lenders adopting an over-cautious approach due to supervisory uncertainty.
Existing borrowers could find future borrowing problematic under the new rules, warned the trade body.
The CML was concerned that the transitional arrangements as currently drafted were complex and may not be widely used.
The CML suggested that instead lenders should be able to lend with discretion on an exceptional basis to borrowers who would otherwise be trapped.
Finally, the CML reflected that the nature and scale of the changes proposed in the MMR couldn’t be underestimated and suggested that 18 months rather than 12 months would have been an appropriate minimum period for implementing the necessary changes once the final policy had been published.
The CML also re-emphasised the need for implementation of the MMR to reflect the outcome of the European directive, as there was otherwise a risk of contradictory requirements that could result in two sets of changes having to be implemented in quick succession.
Paul Smee, director general of the CML, said: “After four consultation papers, the FSA has demonstrated a welcome ability to listen. It needs to continue to do so as we progress towards implementation of some very dramatic regulatory changes.
“It will be important for the FSA to continue to flex if it becomes clear that the new framework will cause too much risk aversion in a market that needs to be able to serve the whole diverse range of creditworthy customers, not just those with the most straightforward circumstances.”
