The proposals, launched last week, were initially welcomed by the industry, as the previous regime had been widely unpopular.
However, article 4.3 (i), which states: ‘The mortgage class would, for funding purposes, include mortgage lending, even though mortgage lending liabilities are not themselves covered by the FSCS’, has caused concern among lenders.
Duncan Pownall, mortgage development manager at Bradford and Bingley, said: “There’s not a lot to be said at this stage as it is only a discussion paper and there are a number of permutations. The exact details and requirements would still need to be outlined but having to fund a scheme you aren’t eligible for is not a good way to do business.”
The proposals are to be put to a consultation process over the next few months but Robin Gordon-Walker, spokesperson for the FSA, believes it is only fair to ask lenders to contribute.
“We feel that the mutual financial interests between lenders and intermediaries is strong enough for both of them to contribute to the fund. Even if the lenders are not having to pay the defaults, we feel on balance it is a suitable proposition and they have to remember it’s only a draft proposal so nothing is finalised yet.”
Mark Sismey-Durrant, chief executive of Heritable Bank, said: “I suspect it is trying to make the scheme more robust and make sure it’s got sufficient weight behind it. However, it seems like it is just chasing money.”
