This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.
X
MM-Cover-Top-240714.jpg

One-way bet for consumers

  • Print
  • Comment

The immediate pre-Christmas period is traditionally a time when trading activity is reduced and time is found to entertain, amuse and bond with colleagues and clients alike. Among all this mayhem, there is a distinct risk that the latest FSA consultative missive may have been overlooked. If so, there is an urgent need to review what is being proposed, determine how it may affect our businesses and ensure that relevant views are expressed to the FSA before the March closing date for comment.

The paper makes much of the effort being made to ensure that the proposals are in line with those being proposed across the EU although it does acknowledge that in some areas, the FSA proposals are effectively goldplating. If the common market is to be taken seriously, then such a situation cannot be acceptable and any such UK proposals need to be made conditional on them being adopted throughout all member states.

Equally important is the need to ensure that there are no gaps in the way that regulation is applied. There may well be a case for applying a common set of rules to all cases where credit is made available to consumers and there is already evidence that some lenders have sought to devise products in the belief that some regulatory regimes are less onerous than others. Some consumers will always have an appetite to get credit and it must be recognised that a requirement to disclose APR does not prevent people from taking credit on terms that “might be injurious to health”.

A failure effectively to protect all borrowers damages the reputation of the whole industry and does not create a regulatory dividend for those who act prudently and in the best interest of clients.

The FSA is proposing that the great majority of sales of regulated lending products must be advised and, except in a very limited number of circumstances, execution-only transactions will be prohibited.

Given the findings that most borrowers believe they have received advice when this may technically not be the case, there is probably a strong case for the requirement to be mandated but given that the majority of sales carried out by lenders fall into the non-advised category, implementation of this requirement will impose a training requirement to ensure an adequate supply of advisers or a review of distribution channels.

The new proposals on advising impose a very considerable responsibility on the individual adviser and virtually absolve the consumer of any duty of care, provided they have openly and honestly answered the questions asked. Advisers will need to be able to justify any advice given, a requirement that goes far beyond the existing test of suitability. Consumers seem to be presented with a one-way bet in their favour, which carries with it the risk of creating a market that is highly susceptible to compensation seekers.

While it must be acknowledged that the regulators must be concerned with the long-term viability of the market, we already find ourselves in an economic climate where the immediate future will be difficult enough without any further changes.

Richard Fox is chief executive of the Society of Mortgage Professionals

  • Print
  • Comment

Daily Email Updates
If you enjoyed this article, sign up to receive the latest news and analysis from Money Marketing.

The Money Marketing CPD Centre
Build your annual CPD - you can log and plan your CPD hours for free with The Money Marketing CPD Centre.

Taxbriefs Advantage
Advantage is a digital reference source giving unbiased, independent, answers to your technical queries. Subscribe to Taxbriefs Advantage.

Have your sayEdit my profile/screen name

You must sign in to make a comment

The Cost of Advice

Sponsored by Brooks Macdonald

Fund Data

Editor's Pick



Poll

Do you think advisers will benefit from Chancellor George Osborne's guidance guarantee?

Job of the week

Latest jobs

View all jobs

Most recent comments

View more comments