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From flexi-loans to funerals

Most UK residential mortgages will fall under the remit of the FSA under regulations published by the Treasury last week.

But the Government has confirmed its decision not to regulate mortgage advice directly.

The proposals, which are likely to come into force in October next year, cover traditional products and newer offerings such as flexible mortgages and equity-release products.

Other areas to be covered by the proposed regulations include loans on property where up to 60 per cent is let out, lending firms and loans sold or transferred to others.

Areas which will not come under protection by the FSA will include top-up loans, buy-to-let mortgages and mortgages for less than five years and timeshares.

The new regulations will also cover prepaid funeral plans. The Treasury estimates 50,000 new plans are taken out each year.

Prepaid funeral plan providers will be regulated directly and require authorisation by the FSA unless the products they offer are eligible for exemption.

Exemption will only be given if schemes are backed by suitable insurance or held by an independently managed trust.

Authorised providers will be fined if they breach FSA rules and consumers will be covered by the full range of Financial Services and Markets Act protection if products are missold.

In addition, two draft orders will offer protection to a range of financial promotions from phone marketing, newspaper and radio advertising through to interactive broadcasting and the internet.

Exemptions from the regulations include start-up and small businesses raising capital from business angels and internet service providers where they have no control over the information.

Treasury economic secretary Melanie Johnson says: “These proposals bring the consumer and industry benefits of the new Financial Services and Markets Act a step closer. Almost all domestic residential mortgages will benefit from regulatory pro- tection under a single regulatory regime overseen by a single regulator.

“These detailed proposals show our commitment to delivering appropriate protection where needed while enabling the financial services industry to keep up with the challenge of change to modernise and to extend and improve competition to the bene-fit both of consumers and the industry.”

The FSA will regulate

Flexible mortgages

Equity release mortgages

Loans on property where up to 60 per cent is let out

Lending firms

Related consumer lending

Loans sold or transferred to others

The FSA will not cover:

Mortgage advice


Buy-to-let mortgages


Mortgages for less than five years

Prepaid funeral plan providers


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