Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…
The first week of June saw the interim Chief Executive of the FCA make his boldest move since taking the reins. In announcing that the FCA was invoking FSMA Section 165 powers linked to a data request to 13,000 firms they clearly indicated that they mean business. All surveyed firms must complete the return within 7 working days, requiring financial performance data, which is supplementary to the usual Gabriel returns. The other important fact is that this is being operated by the recovery and resolution team, not the usual data, strategy or supervisory units.
In the messaging that went with the request and a speech made by the one of the Executive Directors of Supervision, Megan Butler, the purpose is to allow the FCA to be able to identify early in the process firms who may be in financial difficulty or breaching their capital limits. The messaging is that where a firm is loss making, insolvent or has capital issues, they should speak to their supervisor and reach out to the FCA Supervision Hub. This will be to allow them to assess whether the firm can trade out through a recovery plan, or they have to implement closure under a resolution plan and complete an orderly wind-up including transfer of clients.
At a time when the FCA is encouraging all lenders, insurers and firms to support consumers through the impacts of the crisis, and they are looking to advisers to help consumers navigate complex financial circumstances, I am not sure this is the best approach. In addition, we have a government working hard to keep as many businesses open as possible to make sure there is capacity to deliver the recovery. In mortgages we have yet to resolve the mortgage prisoner issue, interest only customers still need help and those who have deferred their mortgage payments will need advice.
Having asked the FCA for consideration of flexibility around reporting, capital and the ability for firms to borrow to bridge the crisis at the start of May, this is the first tangible reply. It is not encouraging. Of course, where there are customers’ assets at risk or client money then this is a very necessary approach. Where however we are looking at a mortgage advice firm I am struggling to see the parallel. They hold no customer money or assets and are merely custodians of personal data. It is to be hoped that when the results are in a very different approach is taken to mortgage advice firms. They may have temporary cash flow issues until purchase and remortgage business begins to flow again, and housing sale and purchase chains complete.
AMI is deeply concerned that the introduction of this approach could precipitate a loss of market intermediary advice capacity, which we should be working to avoid. I implore the FCA to see mortgage advice firms not as a special case, but different and a solution to consumer problems, not the creator.
Chief Executive, AMI