Consumer Duty – an update

Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…

AR regime – updated AMI Q&A and deadline reminder

Having heard back from the FCA, we have updated AMI’s Q&A documenton the AR regime. We also wanted to remind firms of the upcoming 30 November 2023 deadline…

FCA application window open for firms approving promotions for unauthorised persons

Firms that approve financial promotions for unauthorised persons have until 6th February 2024 to apply for approver permission from the FCA…

FSCS levy and compensation figures update

The FSCS has released an update on its levy and compensation figures for 2023/24, as well as anticipated levy figures for 2024/25…

AMI unveils The Perception Gap, the fourth annual Protection Viewpoint

This Viewpoint features hot topics facing the industry, including value of advice, building trust, consumer buying habits and generational views & attitudes…

Your October update from AMI Chief Executive Robert Sinclair

AMI Chief Executive Robert Sinclair gives his October update, focusing on AMI’s Protection Viewpoint, new build and Consumer Duty…

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The FCA is due to deliver final remedies from its Mortgages Market Study in Q4, unanticipated events notwithstanding. AMI has already been vocal about a wholesale move to allow execution-only sales to re-enter the mainstream market.  It is a mistake, and one that risks the FCA’s own Mortgage Market Rules on advice being gamed.

AMI has identified worrying potential unintended outcomes from a shift towards execution-only sales.  The first is that there is likely to be increased pressure on both intermediaries and lenders to generate volume sales through the execution-only channel, particularly as it is lower cost for lenders and brokers to sell and would seem to present lower ongoing risk of inappropriate advice claims.

This could create a reason for mortgage product manufacturers to design up front offers that look attractive to customers, but which may include penalty clauses that bite at the tail end of the deal period. The experience of discount rates sold to sub-prime borrowers in the run into the financial crisis would be an apt example of this type of product design. Prudential Regulation Authority rules requiring residential affordability stress-testing would not rule out this type of abuse, particularly where deal terms are longer. At a time of very low interest rates and comparatively high house prices making longer mortgage repayment terms increasingly normal, the additional expense incurred by customers could be significant over several decades.

The question AMI would ask is whether it could result in customer harm?  There is a real challenge here, reliant on whether regulators in the future are likely to consider a scenario such as this worthy of customer compensation. Much will depend on whether the FCA and/or Financial Ombudsman Service deem lenders and/or intermediaries to be deliberately generating volumes on an execution-only basis to keep costs low and whether the bulk of this volume should have been advised.


Robert Sinclair
October 2019


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