The Council of Mortgage Lenders has warned the FSA against regulating charging practices such as arrears fees.
In its response to the mortgage market review, the CML insists that the FSA should not become a “price regulator” and argues that it needs to understand that a higher price is not necessarily an excessive one. It says: “We would caution the FSA against becoming a price regulator, either in the case of arrears charges or more widely.
“We believe the FSA should exercise caution in its work on charges and fees if it is not going to lead to unintended consequences. The FSA should not assume that a higher price is excessive because it is higher.”
The CML report warns that intervention could put consumers at risk and that lenders are not “profiteering” on their mortgage pricing and are entitled to fair returns.
It says: “Marketwide interventions to address charging practices carry more risks than benefits to consumers.
“We rebut the suggestion that lenders are ’profiteering’ on their mortgage pricing or asking consumers to pay excessive charges. As commercial companies, they are entitled to a fair return.”
Exact managing director Alan Cleary considers the FSA should not be dictating pricing for mainstream borrowers and should instead regulate the parts of the market that are producing customer detriment, including specialist lenders and lenders that outsource their servicing. He says: “The vast bulk of borrowers are not being profiteered against. I think there is more evidence to suggest there needs to be a tightening up of the rules on specialist books, where you are more likely to get arrears. Rather than regulate the whole market, it should regulate the parts of the market that are producing customer detriment.”