FSA rejects CML's cost claim for weeding out rogues

2 July 2010 12:00 pm | By Paul Thomas

The FSA has refuted the Council of Mortgage Lenders’ claims that the approved persons’ regime will cost the industry£15m a year.

In its feedback and policy statement on arrears and app-roved persons, the FSA says the regime will have a one-off cost to the industry of between£9.4m and£13.8m and between£1.6m and£2m a year in ongoing costs.

The FSA says the CML has factored in administration, criminal record checks, project costs and a£2,000 salary increase for lender staff - a factor that the regulator feels is not relevant to the debate or necessary.

The policy statement says: “The industry’s estimation of ongoing costs include a£2,000 salary increase, which we do not agree with. The estimation also includes£200 per person ongoing admin cost. As there is little ongoing admin required by our proposal, we do not agree that it will lead directly to an incremental admin cost of£200 per approved person.”

The Association of Mortgage Intermediaries has backed the regime and says there should be parity in the rules for all those involved.

The plans, which the FSA aims to bring in by March 2011, will require mortgage brokers and those arranging loans to demonstrate they are “fit and proper” in an effort to filter out unsuitable individuals and prevent mortgage fraud.

Anyone arranging home reversion and sale and rentback contracts as well as lending staff arranging mortgages will be included in the regime.
However, lending staff who deal with the customer after the point of sale, such as arrears staff, will be exempt from the registration process. Introducers who refer customers to registered mortgage advisers are also exempt.

When asked if it is possible that the changes might make rogue advisers move into the areas not affected by the regime, FSA head of department for conduct and redress policy Ed Harley suggested the FSA could widen the scope of the regime if it was deemed necessary.

He says: “Over the history of the approved persons’ regime, we have adjusted it in various ways and that is aimed at the risk we see at the time.

“These initiatives are focused on achieving an appropriate level of integrity and dealing with the issues of mortgage fraud and rogue individuals.

“Our objective is to address the issues directly. That will help improve wider standards and confidence in this part of the industry.”

Director general Michael Coogan says: “Whether we like it or not, the referee’s decision is final. In this case, while we may feel somewhatharshly treated in relation to the treatment of lenders under the approved persons’ regime, we do recognise that the FSA is trying to make sure there is a clean game.”

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