•Success of Mortgage Code result of strong industry support
•Surplus funds to benefit all mortgage firms
•Focus on maintaining progress in raising industry standards
He described the MCCB’s key achievements in raising standards, enhancing consumer protection and raising the industry’s reputation, and highlighted the cost effectiveness of the industry self-regulatory model when combined with strong
disciplinary powers and industry co-operation.
Colin Harris explained that, in the knowledge that MCCB would be ceasing its activities and closing after ‘Mortgage Day’ and that no further funding would be available to it, the Board had acted prudently and, over the last few years, built up reserves to cover all potential liabilities. These included outstanding payments on the leases of MCCB’s premises and staff redundancy costs.
Colin Harris announced that a liquidator would shortly be appointed. On current projections it is anticipated that surplus funds of just over £1 m will be available for the benefit of mortgage firms.
MCCB's constitution allows the Directors to distribute any surplus on liquidation to “either the Subscribers or another body with objects similar to those of the Company or to some charitable trust, body or bodies, to be determined in any event by the Board”.
Based on the above projections, the Board has indicated to the liquidator that the surplus should be used to fund a combination of projects aimed at continuing the work of raising industry standards and protecting consumers, together with providing funds for a reduction in FSA fees payable by mortgage firms. The Board believes this ensures good value for the industry and provides a most suitable legacy for the work of MCCB. In
making its unanimous decision to allocate the surplus to specific bodies, the Board was careful to consider soundings taken from the mortgage industry and MCCB’s other
stakeholders.
The Board had also carefully considered the potential for making repayments of fees to individual firms. However, as the administrative costs were significant (likely to be in excess of 10% of the surplus) and it would delay the final liquidation of the company, this was rejected as a non-cost effective option. The MCCB managed its finances carefully and reduced fees in 2003 and, most significantly, in 2004, in order to control the
potential surplus, whilst ensuring that it retained sufficient funds for all potential liabilities. This had effectively already ‘returned’ around £1m directly to registered firms.
Taking these factors into account, and noting MCCB’s responsibility to consumers as well as the industry, MCCB’s Board has decided firstly that £300,000 of the residual
surplus should be donated to the Money Advice Trust (MAT) who work in partnership with a number of charities helping consumers with debt problems. The donation will be directed towards updating training materials, and particularly in supporting an initiative to develop a team of specialists able to provide technical support on mortgages to frontline agencies such as Citizens Advice. The aim is to significantly increase the free money advice sector’s capacity to handle such queries, for the benefit of both the consumer and the industry seeking to work with such consumers.
Secondly the Board has agreed that a further £300,000 should go to assist mortgage advisers in re-training to meet the needs of the new regulatory regime. This will be given by way of grants to charitable bodies involved in mortgage industry training and
education, enabling them to develop and complete specific projects to continue their work in raising standards and to help the industry meet its future needs. The Chartered Insurance Institute (CII) will provide a series of workshops over the next 12 months, the Chartered Institute of Bankers in Scotland (CIOBS) will provide a series of on-line ‘mini broadcasts’ on mortgage related topics, and they and the Institute of Financial Service
(ifs) will be assisted in updating all their on-line training materials and test banks. A significant area of concern mentioned by many was the FSA’s Treating Customers Fairly
(TCF) initiative. A specific donation has therefore been made to the ifs to further resource its qualification, the Certificate in Regulated Customer Care (CeRCC), which aims to provide a clear route of competency for this important regulatory issue. The funds will also enable the ifs to develop both on-line and traditional training packages for mortgage staff in this important area. This is particularly timely given that the FSA has recently released its initial guidance on this challenging subject.
The remainder of the surplus arising (probably a sum in the region of £500,000) will be distributed, in line with the Memorandum and Articles, to the FSA. This is based on a
commitment from the FSA that the monies paid over would be applied to the appropriate FSA fee block to which ex-MCCB firms have been allocated, and would therefore be used to reduce fees payable by mortgage firms to the FSA in the next fee cycle. The Board believes that such a distribution offers the most practical solution and, as there will be no administration costs involved, would benefit all active mortgage firms through
lower FSA fees.
Colin Harris said, “The mortgage industry has invested in the Mortgage Code and work of MCCB over several years, with the benefits of this investment – a professionally qualified population of advisers, strong entry requirements, and the ability to progress smoothly to statutory regulation – well documented. We believe that allocating our final surplus funds in the
way agreed offers best value for the industry’s future, is a responsible way forward, and is consistent with MCCB’s drivers of raising standards, protecting consumers and raising the industry’s reputation. As we close the organisation down, I would again like to thank the industry – all lenders and intermediary firms – for the terrific support you have given our work over the years."
