The four-page letter was sent on 9 September from Dr Eleanor Linton, head of policy and technical standards - High Street Firms Division at the FSA, to Kate Main, senior policy adviser at the CML.
While the letter has brought to a head the debate over the regulation of packagers it has also been used as a point-scoring exercise as parties attempt to justify their long-term strategies on the issue.
Some commentators believe the FSA now requires even ‘pure packagers’ to seek at least arranger status from the FSA. They have seized on a section stating “the mere fact that a firm is operating under an outsourcing agreement will not preclude it from requiring authorisation”.
Matt Grayson, public relations manager for BM Solutions, warned: “This letter is a line in the sand. It could spark off a battle for distribution in the non-conforming sector where a lot of lenders rely heavily on pure packagers.”
However Peter Beaumont, sales and marketing director at Mortgages plc, said he believed it was far from clear whether the letter meant all packagers had to be regulated. “This may not actually affect packagers but it may inadvertently affect branded lenders who will now have to ensure that they are authorised,” he said.
John Maltby, chairman of the Intermediary Mortgage Lenders Association (IMLA) and chief executive of Kensington Group, agreed: “In my interpretation you can’t outsource regulated activity but as pure packaging is an outsourced administration function I don’t think this changes anything.” Maltby said it would be difficult to argue that branded lending did not have any customer contact and therefore did not require authorisation.
The CML has sought to play down the view that there were major revelations in the letter. Its view was that the advice in the letter was completely straightforward. Bernard Clarke, communications manager at the CML, said: “If a packager is providing a purely administrative role and avoid underwriting then it can carry on without authorisation.”
The Association of Mortgage Intermediaries (AMI) said that the letter was a re-statement of information that had been around for some time. “There is evidence of a hardening of attitude from the FSA, however as long as there is a buffer between the packager and the client and they don’t speak to the customer or make the final underwriting decision then nothing should change,” commented AMI director Chris Cummings.
What remained unclear at the time of writing was the status of branded lenders who had elected to remain outside the regulatory framework.
