Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…
In recent weeks we have had some responses from our friends and colleagues in the FCA that indicate they are less inclined towards listening mode at this point in the regulatory cycle. There have been a range of issues where their replies to AMI and the wider market have not been what we had hoped for. This means that in some cases consumers and firms have little choice but to direct their issues towards the Ombudsman Service and ask for the views of Caroline Wayman and her team. In addition, AMI may have to look to form its own solutions with lenders rather than the FCA being involved.
Firms have been reporting to us an increasing incidence of the withdrawal of binding offers by lenders, where the lender or surveyor has made an administrative error that has led them to offer more borrowing than perhaps they should have. These are not fraud or change of circumstance cases. Our view is that this breaches the MCD binding offer provisions. There is the risk that this could cause consumers significant financial loss or inconvenience. We have asked the FCA for some guidance on this but they have suggested that the best solution is to test individual cases with the Ombudsman service. It is likely that we will also debate this with our lender trade body partners.
We have been continuing to challenge the unnecessary holding of a consumer credit permission where mortgage firms are already captured by mortgage rules but the technical authorisation lawyers feel that firms are also captured by consumer credit legislation. This means that firms need to submit returns with no activity and pay minimum fees with no attributable income although this was not the intention of Parliament. This runs counter to FCA’s usual principles as a consultative regulator and we are asked that we should revert to Treasury to obtain changes.
The FCA has also recently consulted on and decided that it is fair to levy a further £10 per annum to cover cost related to “illegal money lending” by adding a further charge on firms holding a consumer credit permission, regardless of whether they attract any consumer credit income. This continual drip of additional costs to firms in addition to minimum fees is challenging.
There has also been a significant mortgage competition review data request sent to a number of firms. We had given feedback that the request was confusing, complex and would require significant work in firms – the feedback has been largely ignored. We are concerned about the number and scale of data requests at this time and wonder where the focus of the FCA is at this time.
Finally, there is the continuing issue of mortgage prisoners. It has been acknowledged by some at the FCA that this could be a problem. However when challenged on this issue at a recent “Live and Local” event the Chairman of the FCA is alleged to have come up with a novel approach. It is reported that he suggested to a group of brokers that they should “target” a lender, come up with a range of “failures” then arrange for a block of complaints to be sent to the Ombudsman. When this happened the FCA might then get exercised by the issue. This appears to be a strange way for our regulator to operate. We either have an issue and it should be dealt with, not wait for consumers to be forced to take the issue through complaints processes which must be the last resort.