TCF deadline. TCF deadline. TCF deadline. TCF deadline. Shall I go on? Well, one more for luck. TCF deadline. There you go. Let readers of Mortgage Introducer be in no doubt about the focus of this article. That’s right, Home Information Packs.
I kid, of course.
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Anyway, the first point of order, the TCF deadline does exist. A number of brokers might not think it does, or have chosen to ignore it, but it does. Research from Mortgage Next among small directly authorised (DA) brokers suggests that 94 per cent are ‘unaware’ a deadline actually exists, while over half believed their existing documentation would be enough to prove to the Financial Services Authority (FSA) they were at the ‘implementation phase’ with their TCF work.
Hopefully, if any of those 94 per cent are reading this they will be in no doubt, following my opening paragraph, that the FSA has issued a TCF deadline. This deadline was issued in last Summer’s FSA publication, ‘TCF – Towards Fair Outcomes For Consumers’. In it, the FSA said that by 31 March 2007 it expected all firms to have ‘implemented TCF in a significant part of their businesses’.
Four stage process
As you may know, the FSA has a four-stage process for firms to work through with their TCF initiative, starting with awareness, moving through strategy and planning to implementation, before ending up with TCF embedded within the business. The FSA is saying to all firms that come 31 March this year, they should be at the implementation phase which means that a TCF review will have taken place, results collated, action points compiled and senior management are empowering staff to deliver change where necessary.
The second part of Mortgage Next’s research regarding firms’ use of existing documentation to prove ‘implementation’ is, I believe, naïve. Yes, this is a regulator that wants to see recorded evidence but it is also a regulator that wants to see the process. For a firm to simply say: ‘We have done this and it is part of our TCF work,’ may not suffice. The FSA will want to see evidence of a TCF review and the conclusions that were made as a result. Following this, it will want to see action being taken and a system put in place for regular, ongoing reviews showing the intent to move to the ‘embedded’ phase.
AMI members have been continually informed of their firm’s responsibilities surrounding TCF and the potential consequences for firms if the FSA believes there to have been little or no ‘buy-in’ to the TCF concept. Not knowing about the deadline is not a good start.
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A more positive picture
Thankfully, research conducted by AMI last month does not paint such a stark picture as that carried out by Mortgage Next. We asked AMI members which stage they were at with their TCF work and 48 per cent said they were either at the ‘implementation’ or ‘embedded’ stage. 27 per cent were simply aware of TCF while 20 per cent were at strategy and planning. To put it bluntly, at this stage, just being aware of TCF is not good enough. Firms should, at the very least, be conducting a TCF review throughout the business. When the FSA comes to determine what action it will take against those firms who have not hit the 31 March deadline, they are unlikely to look fondly on those firms who are merely aware of the initiative. It will want to see action being taken, or the threat of enforcement action will be greater.
We also asked those firms who had conducted a review if they had made changes as a result. 57 per cent said they had made at least a few changes. It may well be that a large number of firms will not have made major changes and the FSA will be happy with this. But, no firm is perfect, and even if the changes have been merely tweaks, firms should record them and make the FSA aware of that action should they be visited or contacted.
It is important to know what type of changes are being made and in what areas. 27 per cent of respondents had made changes to the information given to customers during the sales process, while 22 per cent had made changes to the advice process itself. Other significant advances had been made in terms of making more management information or data available internally – 21 per cent, while 5 per cent had made changes to the way complaints were handled. For those firms yet to conduct a review, these areas highlight where improvements can be made, and don’t forget there are other processes which could be changed such as the way advisers are remunerated – 4 per cent, or altering which mortgage lenders or insurers are on a firm’s panel – 3 per cent.
For all that, a pleasing 85 per cent of respondents are confident they will have implemented their TCF strategy by the end of March, while the major barriers to this have been a lack of time and understanding.
A fundamental problem of the FSA’s approach to TCF has been outlined by AMI research into the information firms have used to help them with their TCF responsibilities. Only 14 per cent had used the FSA’s ‘TCF – What It Means For Small Firms’ information and only 9 per cent had used the FSA’s self-assessment toolkit.
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We believe this shows the need for the FSA to look at the way it engages with smaller firms. The message is either being lost or simply not picked up and we have called upon the FSA to look again at its resources with regard to small firms and the information channels it uses to get its message across.
That said, the deadline exists and there will be consequences for firms that ignore it.
