The FSA proposal to exclude training and competence requirements for non-advised mortgage sales could result in consumer confusion and misselling, says the Chartered Insurance Institute.
The CII's warning comes in its submission to the FSA's consultation on CP146, which outlines its approach to the regulation of mortgage advice.
Under the regulator's proposals, the non-advised route would involve brokers working from a list of filtered questions from which they would not be allowed to stray. It would sit alongside execution-only and fully regulated advice.
In its submission, the LIA has criticised the decision to close the consultation period on CP146 this week before other relevant consultations, saying it does not represent joined-up thinking by the FSA.
It believes other areas such as general insurance regulation, polarisation, appointed representatives and product disclosure must be taken into consideration before mortgage rules can be completed.
The LIA also believes there should be a single definition of independence for investment and mortgage advisers, as having different definitions will only confuse consumers.
The CII says, without adequate training and exams, consumers who would benefit from more advanced mortgage arrangements will only get advice on simple products because that is all their broker is authorised to discuss.
It is also advocating a single-title of qualified mortgage adviser for all regulated brokers to ensure that consumers are not misled.
Director general Sandy Scott says: “If the current recommendations are adopted, we believe that, in order to avoid the extra training required, firms could potentially offer a level of advice that does not meet the consumer's needs. We believe this could lead to confusion for consumers, with the potential for misselling.”
LIA head of public affairs John Ellis says: “It seems to us that sales are either advised or execution-only. The introduction of a person providing information and using filtering questions creates misunderstanding on the part of clients that they are receiving advice.”