Another year is almost over and it’s almost time to get the Christmas decorations down from the attic and prepare the mulled wine and mince pies for a period of celebration. Having said that, I’m not sure if the mortgage industry does ever truly wind down for Christmas anymore and this is, of course, very welcome news for mortgage intermediaries.
You will be pleased to know that the Association of Mortgage Intermediaries (AMI) is not in ‘wind down’ mode either. The work of the Financial Services Authority (FSA) has certainly increased in the last couple of months and mortgage intermediary firms are feeling a general turning up of the temperature from our friendly regulator. AMI, as your trade body, is here to help you every step of the way and rest assured we will continue to lobby those who make the decisions that affect your businesses. We are committed to representing your interests and bringing you plain English information on regulatory developments, helping you plan and prepare for the next 12 months and beyond.
Last week, our attention was firmly turned towards the Office of Fair Trading (OFT) and its payment protection insurance (PPI) market study and proposed decision to make a market investigation reference to the Competition Commisson. I have discussed PPI at length in previous columns – indeed, I believe it has been the issue that has defined the year, and therefore it is important to provide intermediary firms with information on how AMI is responding and tackling this issue.
AMI’s response to the OFT outlines how we share some of its concerns regarding how consumers buy PPI, their understanding of the product and the quality of information available to them. We are also keen to see that the PPI market works for consumers and delivers good value products which are supported by quality product literature.
However, we do believe the mortgage payment protection insurance (MPPI) sector is unique and should be viewed differently to the other PPI markets the OFT identifies, namely, secured loan PPI, unsecured loan PPI, credit card PPI and store card PPI. The OFT is only minded to exclude store card PPI from its referral to the Competition Commission, but AMI believes the MPPI sector should also be excluded. In the report, the OFT calls MPPI itself ‘something of a special case within the PPI sector’ and AMI’s belief is that its special nature, especially the robust MPPI sales processes that have been adopted by mortgage intermediaries, mark the sector out as distinct.
Our response focuses particular on MPPI but also offers some general comments about the OFT’s report and the PPI market in general. These include:
- Our concern at the use of ‘anecdotal evidence’ within the report and a concern that the OFT has not used the FSA’s more up-to-date product sales data.
- A call for greater publication of data on PPI, especially from the FSA in terms of the regulatory reporting data requirements, such as sales and complaints data for PPI.
AMI’s view on what ‘good’ looks like in relation to PPI products, and our continued support for de-linking of PPI from the credit product and unbundling of the individual ASU elements. Consumers must also be clear on what they are and are not covered for and this could be achieved by better up-front plain English information.
Our disappointment that no distinction is made in the report between the different types of intermediary firm and that there is no differentiation between advised and non-advised sales, particularly as most MPPI sales are conducted on an advised basis.
Response
AMI’s response questions the need for the MPPI sector’s inclusion in any referral to the Competition Commission and highlights the reasons why we believe its inclusion is not justified. This includes:
Pointing out that most mortgage intermediaries adopt a two-stage sales approach when dealing with a client, one for the client’s mortgage and one for their protection needs. There is therefore less of a point-of-sale advantage in the MPPI sector.
AMI disagrees that mortgage intermediaries would automatically include the price of MPPI in quotes for the mortgage. MPPI is not sold as a ‘must have’ for the consumer and the products are clearly de-linked.
A focus on the larger number of standalone PPI providers in the MPPI sector and the impact tailored products focused on quality are having on price.
Outlining the role of the mortgage intermediary in ‘shopping around’ for the client.
Our response acknowledges that there is work to be done in the PPI market in terms of clearer information for customers, provision of claims data and commission transparency. We believe that the other PPI sectors can learn from the experience of the MPPI market. Our response also highlights the work AMI has committed to do as part of our action plan submitted to the FSA. This includes:
- Issuing good practice notes to firms on PPI.
- Issuing good practice notes on record-keeping.
- Issuing good practice briefing on how MPPI fits in with other insurance products.
- Launch of good practice Training & Competence guide for members on PPI.
We feel the mortgage industry is addressing its issues with MPPI and that we should be allowed to continue with this work. With this taking place, any referral of the MPPI market to the Competition Commission would be of no benefit to the industry.
AMI members can view our full response to the OFT market study at:
http://www.a-m-i.org.uk/closed/cug/default.asp
