Brokers will be able to continue trading for up to 12 months after M-Day if they have been denied authorisation and want to appeal against the decision.
Which? accuses the FSA of falling at the first regulation hurdle and says it is extremely concerned that people buying mortgages from firms who are not fully authorised will be at higher risk than other consumers.
Although firms have to disclose their interim authorised status, Which? is worried that consumers will not understand that firms have been refused authorisation.
Under the Financial Services and Markets Act 2000, the FSA has given 28 firms interim authorisation where their applications to trade under the new regulations have either been refused or not yet approved.
These firms have to follow FSA rules but they are not covered by the Financial Services Compensation Scheme. Which? says this means that people who have bought mortgage products from these companies are left with inadequate protection should anything go wrong.
Which senior policy adviser Laurence Baxter says:”This whole situation is ridiculous. Firms which appear to have been refused authorisation will be able to continue to trade. The whole point of regulation is to protect consumers from misselling. We have raised the matter with the Treasury.”