MCCB has welcomed many of the changes to the FSA’s original proposals for the statutory regime that have been outlined in the feedback statement to CP146, such as the reduction from three categories to two in the levels of service and product risk. But in its response to CP186 MCCB has also expressed a number of serious concerns, including:
· MCCB remains of the view, backed by its own experience, that use of scripted questions in non-advised sales, to refine the range of products to be discussed, may lead consumers to believe they are receiving some form of guidance, advice or recommendation.
· MCCB believes that consumers in all non-advised sales should be given a warning of the consequences of not obtaining advice, such as is proposed in the case of lifetime mortgages.
· Concern that the key Mortgage Code obligation on firms to explain in writing to the customer the reason for recommending a particular mortgage (the so called Product Confirmation or ‘Reasons Why’ letter) will not be a compulsory requirement under the FSA regime, although it is currently required for investment business and will be required for general insurance business. Whilst many firms may chose to continue to provide this service, it is unclear why the FSA has decided that customers should no longer have the benefit of this safeguard being mandatory.
· MCCB is pleased that the FSA has confirmed its intention to ‘grandfather’ into its Training and Competence (T&C) regime those individuals who have met MCCB’s own Fitness and Competence Requirements. However, MCCB believes that in the interests of the consumer, the use of the term ‘mortgage adviser’ or ‘adviser’ in the context of regulated mortgage contracts should be limited to those individuals who are providing advice and who are either competent, having met the full T&C requirements including examination, or are training under appropriate supervision. In non-advised sales, sales staff should not be termed ‘mortgage adviser’.
Among other key points in its response, MCCB has also expressed the following points:
· Disappointment that the FSA’s category of ‘higher risk mortgages’, which will be subject to tighter regulatory rules than apply to ‘standard mortgages’, includes only ‘lifetime’ or equity release mortgages. MCCB believes there is a strong argument for including other complex mortgage products such as shared appreciation (or equity) mortgages and foreign currency mortgages in the higher risk category.
· MCCB is disappointed that the FSA has removed from the Initial Disclosure Document (IDD) the requirement for an intermediary firm to indicate that it will receive a fee or other commission for arranging the customer’s mortgage. Under the Mortgage Code, such disclosure is an important ‘up front’ disclosure requirement in the interests of consumer protection.
· As the Key Facts Illustration (KFI) document is intended to be used as a comparison 'tool' to aid consumers in sourcing their mortgage, MCCB has concerns that the document should be clear and consistent. To this end it is unclear why, for example, it is not a requirement for firms to disclose the interest calculation basis of the mortgage – annual, monthly or daily – in the KFI. It is also unclear what degree of accuracy is to be required in relation to APR, interest and monthly payment figures.
Luke March, Chief Executive of the Mortgage Board said
“ The consultation process offers the industry and consumer bodies a welcome opportunity to influence the shape of the future regulatory regime. The FSA should develop rules that build on the considerable progress of the Mortgage Code in protecting consumers and raising standards. We know they will consider positively the concerns highlighted in our response.”
