According to an anonymous source close to the regulator, the failure of the sourcing systems to reassure brokers that KFIs produced by them will always be within the margins of error allowed in the MCOB rules, and the fact that lenders will only guarantee their own KFIs, means an urgent review of the current system is inevitable.
The source said: “It appears that the FSA has been shocked and horrified by the mess that has come out of all of this. They are concerned at the varying lengths and are worried that by following the letter of the law some lenders are producing documents which are incomprehensible to the man on the street.”
They went on to say that the review would begin this year and the decision had been taken up to a month before regulation, once the widespread confusion within the industry over KFIs had become apparent.
Industry commentators welcomed the news, though there was concern that the regulator had not taken any action earlier.
Tony Jones, managing director of Pink Home Loans, said it was good to see the new regulator was listening to the industry and was not simply pushing on with policies regardless of the consequences.
“The concern I have always had about statutory regulation is that it will lead to regulatory creep and that customers would end up with too much information for them to assimilate when trying to make a decision,” he said.
Matthew Bright, managing director of Optoma, commented: “As things stand you have documents varying in length form three to eight pages. This just goes straight over the heads of most borrowers. Add to this the confusion amongst so many lenders and I think a review is more then welcome.”
Bright urged the FSA to make sure all KFIs were standardised and written in plain English.
Sole trader Danny Lovey, condemned the current KFI document. “If this kind of mess had been created in the business world heads would have to roll,” he said.
“At the end of the day it’s the broker who ends up dealing with the really messy part of the business, trying to explain to a client why there is so much confusion from lenders when they are trying to get a quote for a home loan.”
The FSA refused to confirm that a review was imminent.
