The warning comes from John Rice, managing director of the Regulatory Alliance of Mortgage Packagers (RAMP). He said: “The issue of network ARs placing business ‘off panel’ is, in many cases, a breach of their network contracts and isn’t going away. The crunch will come when the FSA compares network and lender returns.”
Rice added: “There certainly is a gap. However, what’s not certain is how big the gap is and what the FSA is going to do about it. There are question marks as to whether mortgages written in this way will be covered by Professional Indemnity Insurance (PI).
“There are also question marks over enforceability where lenders have wantonly allowed this to happen, in many cases against the express instructions of the networks.
“Will the FSA turn a blind eye or just slap a wrist or two? I think not. Where there is a clear lack of network supervision, I think it will make an example that will deal another blow to the credibility of networks.
“But will the FSA deem the authorised personnel within the lenders culpable? Probably, depending on circumstances. The industry has to get its house in order before the FSA gets its calculator out.”
Bill Warren, director of The Complete Network, agreed. “We are looking closely at this matter,” he said. “It could cause major problems in terms of FSA regulation as well as contractural breaches. I expect the FSA to come down heavily on offenders and there could be Implications for the individual ARs as well as the Principals.”
Robin Gordon-Walker, spokes-man at the FSA, refused to be drawn into possible recriminations. “The failure of a network to ensure its ARs are compliant will lead to regulatory issues,” he said.
