The Financial Services Authority has ordered more than 200 sub-prime mortgage brokers to withdraw or amend misleading advertising.
The regulator says that brokers who issue poor advertising and promotional materials were also found to have inadequate systems and controls to manage their businesses.
The FSA visited the worst offenders in October and November 2006 and found that where poor promotional materials had been issued, there were usually wider problems at the mortgage brokers.
A number of these firms have now been referred to the FSA’s enforcement division for further investigation.
Examples of misleading information included fee disclosure where the range of fees advertised was very different from what consumers ended up paying. In these firms, customers were also being sold mortgages with sub prime rates where there was no evidence they had impaired credit.
The work on promotional materials runs alongside another FSA project looking at whether customers are treated fairly throughout the sub-prime mortgage advice and sales process. These findings will be published in summer 2007.
FSA retail themes director Vernon Everitt says: “Financial advertising has a massive influence on the decisions people make. So it must be clear, fair and not misleading, leaving people with a balanced picture of the key pros and cons.
“This is particularly the case in advertisements by mortgage brokers in the sub-prime market, where people are making one of the most important financial decisions of their lives. We need to see standards here rising – and fast.”