View more on these topics

EU changes to KFI will spark consumer confusion

European changes to the Key Facts Illustration document will create “confusion” among borrowers and could prevent them from comparing deals from different lenders, say experts.

The mortgage credit directive comes into force on 21 March 2016 and replaces the KFI in the UK with a new European standardised information sheet.

The FCA has given lenders until 21 March 2019 to introduce the ESIS, but from next March they must include additional “top up” information if they continue to use the KFI. This can be included either within the KFI itself, or as an appendix.

Lenders can begin issuing either the ESIS or an amended version of the KFI from 21 September.
Building Societies Association head of mortgage policy Paul Broadhead says some lenders will move to the ESIS straight away to avoid making changes twice, whereas others will amend the KFI in time for March and switch to the ESIS at a later date.

He says: “For smaller lenders, keeping the KFI as it is and issuing a separate appendix is likely to be the simplest option because it doesn’t require any system changes.

“But new lenders will be able to move to the ESIS more quickly because they do not have legacy systems issues. What lenders do will depend on their IT development plans – if they are upgrading their systems anyway, it makes sense to change the KFI at the same time.”

Broadhead says the varying approaches will be challenging for the intermediary market.

He says: “If a borrower goes direct, they just get one document. But if an intermediary gives a borrower information from three or four different lenders, all in different formats, that will lead to confusion and irritation.”

Money Marketing can reveal lenders already plan to take different approaches.

Barclays says it will incorporate the additional information into the KFI in the first quarter of next year, before replacing the document with the ESIS some time before 2019.

Yorkshire Building Society says it plans to introduce the amended KFI by the end of this year, although it is yet to decide whether the additional information will be included as an appendix or not.

Royal Bank of Scotland is understood to be planning changes for March, while Virgin Money and Coventry Building Society say they plan to use the “KFI plus” initially rather than switching straight to the ESIS.

Other lenders say they are still evaluating their options.

A source close to lenders’ plans says: “Most lenders are in a mess. The software code for their KFIs was typically built a decade ago, and the people who built it will be long gone, meaning any amendments will be challenging.”

Council of Mortgage Lenders communications manager Bernard Clarke says: “There are some major processing and systems issues for lenders to consider and it is up to them to decide what works best for their business and their customers.

“Lenders may issue slightly different documents at different times, but they will still contain information that allows customers to make comparisons.”

But John Charcol senior technical manager Ray Boulger says: “If the purpose of the KFI is to allow consumers to compare different products, clearly having documents in different formats compromises that.”

Boulger says most lenders are likely to use an amended version of the KFI rather than switch straight to the ESIS.

“One of key factors is the timescale,” he says. “The IT work involved in moving to the different format of the ESIS is quite significant, and given the FCA only published the final directive rules in March, lenders may not be confident of getting the ESIS ready for next March.

“The timing of lenders switching to the ESIS will vary. If the Conservatives win the general election and deliver their promise for an EU referendum by 2017, some lenders may wish to wait for the outcome of that before making expensive IT changes.”

The changes will also have a major impact on mortgage sourcing systems, which will need to be able to support the varying documents.

Mortgage Brain chief executive Mark Lofthouse says: “We advocated the shortest possible transition period to minimise confusion, but the FCA opted for the longest transition period.

“We are committed to supporting brokers through this change and our system will be able to support the requirements of the directive, including the production of ESIS and KFI plus documents.”

Recommended

David-Cameron-700x450.jpg
7

Conservatives secure majority as SNP trounces Labour

The Conservatives have secured the 326 seats needed to form a majority government following a stunning election night which saw Labour hammered in Scotland by the SNP. The Tories are forecast to win a total of 331 seats, compared to just 232 for Labour. In Scotland the SNP won 56 of 59 seats, reducing Labour’s […]

Aviva-signage-building-2013-700.jpg

Hermes poaches Aviva exec for real estate arm

Hermes Investment Management has appointed Aviva’s head of European retail funds, Philip Nell, as fund director for the company’s real estate unit, Hermes Real Estate. He will join the £6bn real estate arm on 20 July and report to to Hermes Real Estate chief executive Chris Taylor. Nell will also work as fund manager of the UK Private Rental […]

HMRC amends pension reclaim form

HMRC is to change the wording of one of its new tax forms for people reclaiming overpaid tax on pension withdrawals, after confusion over who could use it. Form 55 is to be updated because it currently implies it should only be used if “you’ve only taken one payment and do not intend to take […]

Altmann-Ros-2010-700x450.jpg
17

Altmann turned down pensions minister job

Ros Altmann was offered the role of pensions minister by the Conservatives but turned it down, Money Marketing can reveal. Instead, Altmann will be made a peer and appointed minister responsible for financial consumer protection and education. Former pensions minister and LibDem Steve Webb lost his seat in today’s general election, leaving the Conservatives without […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com