The FSA initially demanded that lenders clarify their positions on fees relating to current mortgage contracts. This next stage relates to business going forward. While lenders do not have to come back to the FSA by the July deadline, lenders will be expected to demonstrate when asked that the cost of their exit fees reflect the actual costs involved when a customer leaves a mortgage.
The FSA maintained it was not a price regulator and would not set prices for lenders.
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Samantha Bennett, spokesperson for the FSA, said: “If firms are presenting the fees as exit fees, the costs should reflect the actual costs involved. Lenders need to comply with the law and the burden of proof is on them. Everything is on a case-by-case basis, but we can take supervisory enforcement action if it becomes necessary.”
However, Mark Sismey-Durrant, chief executive of Heritable Bank, argued that the regulator seemed to be going back on its move to principles-based regualtion. He said: “The FSA is supposed to be heading to principles-based regulation, but this is going into a prescriptive route. Exit fees are not penalties, they are charges. If the tariff is clear and the Key Facts Illustration is clear about the level of fees, I don’t see why the fees can’t be set at a reasonable level.
“What has happened to the open market? It would be a real irritant if the regulator directly intervenes in lenders’ pricing policy. It’s quite another thing to say where lenders can make their margins from when it is clearly disclosed.”
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