The work will be carried out as part of the regulator’s long-running assessment into the implementation of its ‘Treating Customers Fairly’ (TCF) ethos.
Although cascade systems are considered a useful tool for brokers placing non-conforming business, the FSA is said to be concerned about the number of lenders whose systems do not have the facility to cascade upwards to more mainstream products when applicants have a better credit rating than previously anticipated.
It has also queried whether brokers were using the information obtained in the cascade process to research the market for the best deal when an application has been downgraded, or whether they were simply feeding through what has been recommended by the lender.
An industry source close to Mortgage Introducer, said: “If the lender makes a recommendation, which is then taken on by the client, the issue of advice is called into question. Who is giving advice? This is one of the regulators main concerns.”
Commenting, Robin Gordon-Walker, spokesperson for the FSA, said the regulator’s priority was to ensure customers were treated fairly when getting mortgage advice. He said: “Whatever system a broker uses, the issue regarding ‘Treating Customers Fairly’ does not change. The outcome for the borrower in terms of the offer they are presented with must be the most suitable for their circumstances.”
Rob Griffiths, associate director at the Association of Mortgage Intermediaries (AMI), supported this view. He said: “The key concern we have regarding cascading systems is that brokers using these facilities are not automatically feeding the alternative product offered by lenders to their clients. It’s crucial they do another factfind using this additional data to ensure they are giving best advice.”
