The Council of Mortgage Lenders has raised concerns that brokers will be able to continue trading after they have been refused authorisation.
The Treasury has revealed that mortgage firms which fail the authorisation checklist will still be allowed to continue dealing with clients until their appeal is complete.
Once a firm has been refused authorisation, it has 28 days to apply for a tribunal hearing. After this deadline has passed, it cannot challenge the adjudication.
Although the CML says that this process is a sensible approach and will only affect a small number of companies, there are concerns that consumers could be exposed to a higher level of risk than those people dealing with fully authorised firms.
An appeal process can take several weeks and during this time the firm will be interim authorised. This means that they will still be trading and subject to FSA rules but will not have full authorisation.
FSA spokesman Robin Gordon-Walker says: “I see the point you are making – why are some firms that are possibly posing a risk being allowed to carry on trading but you have to realise they will still have to follow our rules and will be interim authorised. It will be mandatory for them to disclose this to their customers.”
CML spokesman Bernard Clarke says: “I think that you do have to assess carefully whether a person or firm does fulfil the requirements. It is appropriate for the FSA to make sure the decision that has been made is the correct one.”