The Financial Services Authority said this morning that the far higher rate of fraud in the mortgage sector justified stricter criminal record disclosure for mortgage brokers going on the approved persons register, than IFAs.
Robert Sinclair, director of the Association of Mortgage Intermediaries, said that CF31 suggests the FSA considers mortgage brokers to be higher risk to the consumer than IFAs. This is reflected in the fact that IFAs are required to disclose any criminal convictions to the FSA, but mortgage brokers will have to supply a Disclosure Scotland or a criminal records check.
In the past and in the IFA sector, the FSA will do this check themselves.
An FSA spokesperson said that the discrepancy reflected “the concerns that we have about mortgage fraud in the broker market. With IFAs there isn’t the same level of fraud”.
Sinclair said AMI had “yet to be convinced” of why this discrepancy existed, suggesting that as IFAs hold client money, they should be subject to the same level of stringency as mortgage brokers.
This morning the FSA published its intention to extend the approved persons register across the whole of the mortgage industry, including everyone involved in the mortgage sales process.
The FSA statement said: “We will not automatically refuse applications for approval from individuals, who have criminal convictions, but these issues do raise serious concerns and they will need to be taken into account by firms and by us in making a decision about the approval of that individual.”
The timeframe of the application process is initially confirmed for early next year, with the FSA expecting to accept applications from the 31st March 2011.
The cost of implementation of the AP register, which AMI and the Council of Mortgage Lenders have expressed serious concern over, is estimated to be nearly £14 million for the industry.
The FSA statement said: “The total one-off cost associated with extending the AP regime to cover the relevant activities will be £4m to £5.5m for the FSA, and £9.4m to £13.8m for the industry.”
The regulator estimates that 20,000 advisers and arrangers will be affected, and the number of lender staff will be around 11,500.
Ed Harley, director of mortgage policy at the FSA, said that as ever, cost would be apportioned to the industry in a way that was consistent with the FSA’s fee-based approach. He said: “Costs will be commensurate to supervisory effort.”
