At last week’s FSA mortgage sector conference, Small Business Practitioners Panel member for mortgages Stephen Atkins war-ned that the FSA will have to monitor and regulate distributors closely in the wake of recent problems with networks failing to pay commission.
He said: “Everyone, including the FSA, must ensure that these firms are monitored and regulated correctly.”
But speaking to Money Marketing at the conference, Titcomb admitted that the regulator’s powers regarding commission are limited. She said: “There are a number of networks having trouble paying commission to their appointed representatives. We know it is happening and it is a sign that the firm may be in financial difficulty. But there is not much we can do to specifically help individual intermediaries. Do we need to change that? I think it would be very difficult.”
Titcomb also warned that further mortgage fraud cases are likely to come to light. Last week, two mortgage brokers were banned for fraud, bringing the figure over the past two years to more than 40.
“We are getting a constant flow of information from the lenders and it is not a diminishing problem. We get a range of sources of intelligence, including from advisers, and we take all that very seriously. “
In his speech at the FSA conference, Association of Mortgage Intermediaries director general Chris Cummings criticised the regulator for concentrating on broker fraud and asked when other parties would start being sanctioned for fraud.
However, Titcomb said: “We are dealing with cases of fraud by small individual intermediaries. Obviously, it takes much longer to investigate and act on more complex forms of fraud.”
Titcomb also expressed a note of warning as to the growing problem of phoenix firms in the sector and called on the indus- try to watch out for any illegitimate firms. She said: “We tend to see an increase of phoenixing in a recession but it is diffi- cult to monitor firms in such a large industry.
“We need to keep out people who are manifestly phoenixing, so intelligence about who is moving around and who has left problems behind in their previous firm is very, very important.”
The FSA also has concerns about mortgage brokers looking to profit from unfamiliar areas of business without the appropriate skills and knowledge.
Titcomb said: “One of the key risks we are concerned about in the intermediary sector is where intermediaries, because of business pressures, go into new types of business. My message is always the same – think about what you are getting into and be absolutely clear about what you need to be doing to treat your customers fairly in that sector.
“If advisers stray into the wrong thing and do not do it properly, it could affect them badly. We have been keeping a very close eye on this.”
But Titcomb insists the FSA does not have an axe to grind with small firms in particular.
She said: “We know mortgage intermediaries are finding it extraordinarily difficult right now but I sincerely believe there is a future for the pure mortgage intermediary. We are not against small firms – many do an excellent job and have the interests of their customers at heart.”