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FSA must ignore lender pleas over non-advised ban

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The FSA ended 2011 on a positive note with its mortgage market review proposals striking the right balance of guarding against irresponsible lending without unduly affecting current and future borrowers.

In announcing its stand-out policy of banning most non-advised sales the regulator gave a rare nod to the value of advice and rightly highlighted consumer confusion around whether or not advice, and the protections that come with it, is being received when a mortgage is taken out.

Unfortunately a few of the big lenders are less than happy with the FSA’s plans and have been spending the festive period plotting a lobbying campaign to attempt to change the regulator’s mind. The FSA must stand firm.

For too long many lenders have blurred the lines between advice and information when dealing with customers, allowing them to make their profits without any of the pesky responsibility and consumer protection that comes with an advised sale.

Around 30 per cent of mortgage sales are non-advised but many consumers do not understand the distinction in the service they are receiving. There is no direct link between risk and advice provision, with similars level of low and high risk products sold without advice, according to an FSA table published alongside the MMR (see table below).

The FSA’s cost-benefit analysis suggests increasing professionalism amongst bank staff will lead to one off costs of between £17m to £28m. Some lenders will argue these costs will be passed on to consumers with negligible benefits.

They have already pointed to FSA statistics, also published alongside the MMR (pages 162-163), which show little difference in the default rates between advised and non-advised sales as evidence to retain the status-quo. However, impairment issues are usually triggered by a change in circumstances, such as losing your job, and should not be seen as the over-riding benchmark of service quality.

Lenders are unhappy their staff will have to gain appropriate qualifications and abide by regulatory rules such as ensuring the suitability of the product. They will have to take on the extra business risk of an advised sale in terms of the consumer’s recourse to the Financial Ombudsman Service.

But all of this is what customers expects to receive when being helped to arrange often the biggest financial commitment of their lives.

Association of Mortgage Brokers director Rob Sinclair gives the example of where a lender writes to a customer at the end of a fixed rate or incentive period. In this situation a customer probably thinks that regulation is protecting them and ensuring the lender operates in their interests. These new rules will ensure that is the case as the communications will be linked to an advised sale.

Rather than adding another layer of unnecessary bureaucracy to lenders, these proposals will enshrine the protections and rights consumers think they are already getting.

The FSA must ignore the pleading of certain big lenders and stick to its guns over its non-advised sales ban. Consumers deserve the protection and service that comes from receiving advice from qualified and competent individuals.

Paul McMillan is editor of Money Marketing - follow on twitter: @mcmillan_paul

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Readers' comments (22)

  • To Anonymous | 6 Jan 2012 12:24 pm

    I would be prepared to take the sanctimonious drivel! comment if you were prepared to put your name to it !

    I thing we do have to save people from themself as in my experience people tend to ask whats the maximum amount they can borrow - not what amount they can afford to borrow !!!

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  • Disillusioned by Democracy- Made into a scapegoat

    Taking a home mortgage is the most important financial commitment as it is the roof under which a family unit lives, or will live. The financial security of this ‘family unit should be paramount’ as this unit forms a base of what a good Democratic society ought to be in all good faith.

    I welcome the stricter rules to be put in place by the FSA later this year 2013 to prevent the indifference, the brow bashing of millions of innocent consumers trapped by the wrong advice given by brokers or bank managers, or their designated company solicitors who are employed to protect their interests alone.

    Entrapment by the lenders who turn a deliberate blind eye to the faulty financial products as we have seen the Mortgage protection Insurance etc, wrong mortgage home loans, sold by agents of their choice, to whom they paid a fee to, so as to procure financial scapegoats on the gravy train. Faulty products are marketed for financial gain alone for them.

    The ultimate responsibility should be on the shoulders of the lenders as not only is their money at risk if things go wrong, the borrowers home and investment for their kids is also put at risk.

    A Home, for a home buyer it is a roof to live under, and should be a safe place to live free from the Financial Criminals whose sole purpose is to confuse and sell products that are unfit for purpose.

    The Mortgage Conditions 2004 E& Wales is an instrument that condones conflict of interest in favor of the lender contrary to Statutes in the Law of Property Act 1925 E& Wales. The urgent revision of the Mortgage Conditions 2004 E& Wales should be revised to exclude, and remove all clauses that give rise to conflict of interest in favor of the lenders. eg: Allowing any amounts of money to the mortgage at any time when in the first instance when it is their recklessness that have caused the brow bashed consumer to seek redress in Court, as I was forced into taking, only to be turned away from the protection the Courts of law should actually give to me and victims like me.

    If rules have been broken by the lenders with substantiated evidence, they have to be penalized and if it means that financial ruination of the lender, by the mortgage made void by the Court so be it as for too long good hardworking citizens have been hoodwinked of their homes and businesses too quick by super fast eviction condoned by the Courts as I have experienced. The ‘heart’ has to be put back into the ‘Heart and the spirit of Democracy,’ ripped out by the greed of such financial agents who all collude to defraud.

    The Financial laws should be clear to the Judges who undertake such cases to stem the abuse and ignorance or bias should not be used as an excuse. The Judges should know and uphold what is right and should know what is wrong. Sound judgement should be passed and not those that are contaminated with bias or personal opinion.

    Today’s Judges and Prime Minister should look hard into the eyes of their children for it is their duty to protect their future of not only their kids but the future generations.

    No one buys a home with intentions to lose it as any time other than when the borrowers face a marital divorce. A home loan should be a happy home and not a one made in hell.

    I applaud Scottish Solicitors who have voted for independent legal advice should be statutory for both the borrower and the lender to prevent conflict of interest in favor of the lenders. Ambiguous Incentives offered by lenders to pay all legal costs giving the false illusion that legal advice in all common sense would be part of the package as we all know there are two sides to Property conveyance the legal side and the financial side. If I had benefited from legal advice then I would have made other choices before accepting to re-mortgage twice in two years for loan consolidation as I got more and more heavily in debt.

    Legal redress should be in place all the way when things have gone wrong, for litigants in persons and those who are fortunate to have legal representation deliberately duped by the lenders, their designated company solicitors and later their attorneys who go on to deliberately and pervert the course of Justice with sole purpose to win. The sanctity of Statements of Truth should remain so and those who mislead by this Oath should face the wrath of the law and not the other way around.

    Dragged into Court due to lack of disclosure by the same individuals who were responsible to put all the aspects of a legal mortgage in place. I have been burdened with the Court costs of £50,000/- £42,000/- of which already added to my mortgage with no conscience by the lenders or by the Judge that threw a valid claim out, based on personal opinion alone, and prevented me from seeking redress in High Court by adding his opinion that my claim was not of High Court matter, this could be seen as I understood as openly influencing the High Court Judge even before an independent Judge is allowed to consider the merits of the case, who later went on not to order the above costs, that has been anyway by the lender, due to the powers of the Mortgage conditions 2004 E& W booklet.

    After failing to put together a duly signed financial contract that stipulates all the terms and conditions to accompany the deed especially the end date when the amount has to be repaid, that should be in place in not only new sales of mortgage but also re-mortgage when a re-mortgage is passed on from one lender to the other.

    A fresh financial contract should be in place in addition to the Mortgage conditions booklet as no booklet can be taken to be or have the same weight of a contract.

    The borrower who is already at a significant disadvantage should have independent legal represent to be explained all the terms not added in the Key Facts. even if it means it will cost £500 more.

    The lenders designated company solicitors swore and Oath that they had never been asked by the lender to give me legal advice. Yet the deed was signed by proxy, in arms length on behalf of the lenders by an unnamed designated company solicitor. Knowing that the Key Facts would also be drafted legally by them had clearly stated all the ambiguous all legal costs would be an incentive.

    Hands on my heart If I had befitted from independent legal advice so many errors would not have been made and I would not have forced myself to seek the redress in Court down the line when things went wrong first to defend a super fast eviction, when I was recuperating after the hit and run accident in 2006 and then in 2009 shortly after my mother passed.

    Two traumatic events in a person life where one needed the solace of a home and not a prison wall, or the ugly noose of eviction! What I have had to experience has made me personally disillusioned by Democracy and all the goodness of Democracy that I grew to be in awe of.

    This is an absolute mockery of the sanctity of the Property Act of 1925 and a very cruel joke handled by those in power to protect the law of the land.

    I will live the rest of my life in this ugly shadow until my case is re-opened and reviewed independently and I am able to seek redress and damages.

    Now forced into negative equity and burdened to pay a higher monthly mortgage and I will be forced to sell my home to repay this loan when the term ends in fourteen years. No demands were made to put a repayment plan in place from 2005-2013. Eight years down the line and knowing that no statutory provisions to put a repayment plan in place was made at the inception of this mortgage the audacity of the lenders who now demand that I put a repayment vehicle to protect the additional court costs now added to the total amount.

    I am paying for the errors made by those who are allowed to trade, these lenders and all their agents still continue to trade DID NOT GET IT RIGHT when the responsibility was solely theirs alone AND DID NOTHING TO PROTECT MY RIGHTS. I am burdened by a predatory style mortgage prevalent in America.

    By a letter dated 23 Sept 2012 sent by recorded delivery to the various Heads of Departments and I still await a reply of acknowledgement from David Cameron and Nick Clegg, and the FSA we are now in April 2013 as I still hope and slowly die in despair that the Democracy I grew up to love, and cherish has let me down and millions like me.

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