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Firms failing authorisation can trade on for a year

Mortgage firms which fail the FSA authorisation process can continue trading for another 12 months while they wait for an appeal.

Under a Treasury ruling, mortgage firms applying for authorisation which are turned down by the regulator will be able to continue trading as interim authorised while they wait for a tribunal hearing.

Although firms will have to disclose their interim-authorised status to consumers, some industry figures are concerned that this may lead consumers to believe their firm is waiting for authorisation.

Although clients will be protected by the Financial Ombudsman Service, they will have no recourse to the Financial Services Compensation Scheme.

The FSA says interim-auth-orised firms will have to comply with its rules and any consumer who has problems with a firm during this period would follow the same procedure.

Huntswood Outsourcing corporate strategy manager Daniel Yates says: “Firms that have had their applications turned down are likely to be ones with customers who should be protected by the FSCS.”

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