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&#39Regulation could finish small firms&#39

The Council of Mortgage Lenders says FSA mortgage regulation could drive out smaller intermediaries and lenders as bigger players club together to cope with higher compliance costs.

At the CML annual conference in London last week, senior policy adviser Kate Main said she fears CP146 proposals mean smaller firms will be unable to compete and consumer choice would suffer.

Main said: “We would not want to see the tail wag the dog with the structure of regulation dictating the structure of the market.”

She was responding to FSA high-street firms director Sarah Wilson who claimed there is “not necessarily a relationship between the number of intermediaries and the scale of consumer choice.”

Wilson said the FSA does not have a view on what would be the optimum number of firms in the market.

Main also attacked the filtering questions proposals in CP146 as a middle ground between advice and execution-only sales, warning that consumers may be confused and think that they have received advice.

She said brokers using this method are concerned that the lack of clarity will “come back to bite them” if clients are unhappy with their mortgage and complain to the ombudsman that they were wrongly advised.

Aifa director general Paul Smee called on the FSA to put intermediaries with a good compliance track record on a fast track under the Mortgage Code Compliance Board into the new regime and warned against compulsory professional indemnity cover.

Smee said: “PI insurance is a nice idea but if it is compulsory you have got to ask if it is available in the marketplace and the answer is no. PI is in severe crisis with an excess of demand over supply.”


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