The Council of Mortgage Lenders has slammed the FCA’s cost benefit analysis of its data reporting rules as “flawed” and warns the cost burden will ultimately fall on consumers.
The trade body has published its feedback this week to the FCA’s Mortgage Market Review consultation paper on data reporting, launched in May.
It warns the increase in information lenders will have to provide under the MMR is a “sea change in the scale and nature” of what they currently submit.
It says: “With the reporting burden increased to this degree, we believe it is vital the FCA sets out clearly how it will use this greatly-increased amount of data effectively, so that firms better understand the justification.”
The trade body says lenders already report 31 separate items of data to the FCA on each of up to 250,000 new sales each quarter.
But the FCA proposals represent a massive increase on this to 130 items, reported for the entire regulated loan book of around 7 million loans.
The CML also argues the FCA’s cost benefit analysis of how much it would cost to comply with the new data rules was “flawed”.
The FCA’s analysis, published in the original consultation paper, was based on a survey of lenders affected by the proposals. But the regulator admitted the response rate had been low, which it said made “the calculation of reliable estimates difficult”.
Seven lenders provided information for the product sales data reporting requirement, just 3 per cent of the 250 banks, building societies, bridging lenders, lifetime mortgage lenders, and credit unions that will be affected by the rules.
Nonetheless, the FCA estimated one-off costs for the sales data were estimated between £28,000 and £1m, with an average of £270,000. Ongoing costs for sales data were estimated to be between £2,500 and £100,000, based on lenders using automated reporting, The regulator admitted costs would be higher for those creating them manually.
For the performance data, estimated one-off costs were estimated to be between £29,000 and £263,000. As well as staff training, systems changes were again a key driver of the costs, and were expected to be higher where firms would be required to extract data from multiple systems. Ongoing costs were estimated to be between £6,000 and £19,000.
The FCA said the key benefit of the proposed increase in data reporting was to help it identify non-compliance by mortgage lenders and alert it to emerging issues.
But in its feedback the CML says the FCA has ”materially underestimated the resource implications of performance data reporting”, and this will actually represent the biggest cost to firms.
The CML says: ”Given the size and scope of the proposals, we urge the FCA to engage with technical experts from the industry before issuing final reporting rules. That would enable us to work with the regulator to ensure the data fulfils the FCA’s objectives effectively, without imposing a disproportionate burden on firms and ultimately – as costs have to be absorbed – on consumers.”