The Financial Conduct Authority will allow pipeline applications to continue on a non-advised basis for three months after the introduction of the MMR, as long as it is received before 26 April.
This transitional provision for non-advised sales applies to both direct and intermediary business. However, all other elements of the MMR, including its responsible lending requirements, will apply to these applications.
The FCA’s latest quarterly consultation paper says firms have raised concerns that if a change is made to an application, they would have to apply the MMR rules, which could mean a non-advised application would need to become advised. They argued it may not be in the best interests of the customer as it could add delays to the process and increase costs.
While the FCA has reservations about granting firms a further three-month transitional period, it says it does “see the case” for allowing the provision to ensure customers do not suffer.
The paper says: “We have concerns about allowing a further three-month transitional period as it could enable applications prevented under the new rules to proceed, which would undermine the protections the MMR provides consumers. However, we also see the case for allowing a transitional provision to ensure the consumer does not suffer from unnecessary delays or costs.
“Therefore, we propose to allow non-advised applications, received by the lender prior to 26 April 2014, to continue to be processed on a non-advised basis if a change is made, for a further three months.”
However, the FCA adds that firms could avoid the issue by getting rid of the non-advised sales process ahead of the MMR’s implementation on 26 April.
In October, the then Financial Services Authority published the MMR final rules, which will ban non-advised mortgage sales where there is any form of “interactive dialogue” with a customer.
However, consumers can change things like their repayment method, switch rates and take out retention deals without advice as long as they do not wish to borrow more.
Building Societies Association head of mortgage policy Paul Broadhead says: ”This makes sense. What we were concerned about is that if a customer comes along with a non-advised sale in early April and something has happens and need, say, an extra £500, the fact that is a material change means that would have to be advised. It is confusing to the consumer and adds no value.
“This is absolutely the right approach, although we would have liked a little longer. However, I think the FCA has taken a sensible approach.”