Speaking at the Financial Services Expo in London today Keith Hale, technical mortgage specialist at the Financial Conduct Authority, said one of the biggest challenges of the Mortgage Credit Directive in March next year related to service disclosure.
Currently the FCA allows brokers to disclose this information orally but the new rules require brokers to disclose remuneration and scope of advice in a durable format to clients before commencing any conversation relating to advice.
Hale said brokers must start to consider how they deal with this requirement and suggested that one way to avoid having to abandon client conversations over the phone would be to email a disclosure form to clients at the beginning of a call.
He said: “We are not saying this is the right way, but a way to deal with this would be to ask clients for an email address at the start of the call and then while you are having the conversation, email them your disclosure form.
“If you can’t get disclosure to that customer in a durable format then you cannot have that intermediation conversation and you will have to put down the phone.”
He added that brokers must also implement a process to identify when a borrower applying for a buy-to-let mortgage falls into the consumer buy-to-let category.
Standards required under the MCD can be applied by firms from next week on 21 September.
Hale said the regulator has “turned on the rules early” to cause as little disruption as possible and suggested firms adopt the rules ahead of the 21 March 2016 deadline.
“Any business that is likely not to complete by 21 March must adhere to the MCD standards, even if it was arranged before this date,” he said. “We are concerned that the MCD happens almost without people noticing.
“We need the market’s help to deliver this. Good consumer outcomes are not the broker getting to the 20 March and realising that a transaction isn’t going to complete and then having to re-broke the business from the beginning.
“If you haven’t started thinking about this yet, then really, shame on you. The clock is ticking.”
The regulator has today published a series of factsheets for first and second charge lenders and brokers wishing to have more detail on the incoming MCD implementation.
