The move takes the General Insurance Standards Council (GISC) out of limbo, following its defeat in the courts by the travel industry, and finally recognises the arguments put forward for over two years by the Council of Mortgage Lenders and more recently by the DeAnne Julius report. This, the economic secretary acknowledged, argued that mortgage advice should be regulated, echoing the sentiments of many consumer groups and the industry. "We have listened to these views and, after reviewing the policy, believe regulation will bring benefits to both consumers and businesses", she said.
Kelly added: "Many of the 12,500 UK mortgage brokers also sell general insurance. In order to maintain a consistent and streamlined approach, the sale of general insurance products will be regulated by the FSA. Brokers who deal in two or more lines of regulated business will deal with a single regulator, not several, and will be able to compete in European markets. Additionally, the government will look at insurance sold as part of the package with another product - for example, travel or extended warranty - to consider the implications of the new regime for them."
The FSA will now consult with all interested parties on the details of the new regulatory regimes to introduce appropriate protection for consumers and ensure that firms benefit from the resulting simplification in the regulatory arrangements.
Howard Davies, chairman of the FSA, said: "We recognise the merits of bringing both mortgage and general insurance brokers within the FSA’s scope, providing a single regulator for such firms and greater protection for consumers. Smaller firms, in particular, have told us that the current mix of statutory and non-statutory regulation imposes extra costs and burdens on them. The requirements of the new regimes must be proportionate to the risks faced by consumers and ensure that the benefits of competition and innovation are retained."
"The government have said that they will consult on the timetable for implementation of the new regimes and expects that they will come into force simultaneously. We hope that voluntary industry arrangements will be retained in the meantime to provide protection to consumers, and we will work, in full consultation with all concerned, towards a smooth transition to the new regimes."
As a result of this announcement, the FSA will need to re-consult on mortgage regulation. Where still relevant, it will publish and take account of the results of its consumer research and responses to consultation paper CP98 that set out the FSA’s proposed regime to deliver mortgage regulation as originally required by the government.
