Debate at the recent Mortgage Compliance Forum saw the issue over secured loan regulation raised, with members questioning the reasons why the second charge market had remained outside of the Financial Services Authority’s (FSA) remit, despite the fact that many secured loans were now bigger than mortgages.
Philip Tebbatt, principal at Slater Rhodes, summed up the argument, and said: “Why aren’t secured loans regulated? We are now seeing second charges which are bigger than first charges, so it can’t be right that they are not regulated. If you looked at many secured loan cases from a ‘Treating Customers Fairly’ perspective, some wouldn’t even get past first base.”
It was also claimed that expected changes to the secured loan market brought about by the upcoming Consumer Credit Directive (CCD) could see secured loans ‘lumped in’ with mortgages.
This, according to one member of the group, meant that the industry would soon face a situation where it would become impossible to keep firsts and seconds apart.
Commenting on the issue, Robert Sinclair, director of the Association of Finance Brokers, said: “The CCD should be approved in the next couple of months. Once this is implemented, it might create a two-tier Consumer Credit Act or see the FSA take control of secured loan regulation.
"The latter would be the more logical conclusion. The FSA has also waited for the CCD to rewrite MCOB so by the end of the year, if the CCD is passed, that will be rewritten and secured loans will be under the FSA.”
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