The FSA has clearly indicated its intention to press ahead with reforms to mortgage regulation after publishing its recent consultation paper.
In terms of arrears handling, the proposals seem to do little more than seek to enshrine into rules what would be existing best practice for most firms. Of course, experience has shown that some firms were not operating to those standards so perhaps it is necessary to take action.
However, in writing such regulation it is important to recognise, as the FSA has done in the past, that precise rules do have the disadvantage compared with principles that it may be possible to comply with the precise rules while operating in a manner that would be found wholly unacceptable by the great majority.
We only have to look at the recentexample of MPs’ expenses to see how that can be the case. There is also a difficulty when devising rules in that it is not always possible to envisage all the circumstances in which it may be necessary for them to operate in the future. In some cases, business practicemerely develops over time while in others it may be that a practitioner will devise a methodology which cleverly avoids the legislation.
The regulator needs to keep alert to any such practices and to move rapidly to protect consumers and to preserve the reputation of the industry as a whole.
In a similar vein, it is not helpful that in spite of the recent extension of FSA powers to encompass some of the activities previously undertaken
under the Banking Code, there are still areas of lending that lie outside its remit.
The market is competitive and it is only right that lenders are profitable and that products are properly priced for risk but it is also important that consumers value the services that are available to them
We must be conscious that many of the more serious cases of consumer detriment occur with those borrowers who have the most restricted
access to credit and where the rules on doorstep selling and collection need much stricter control.
Advertising by these firms was very visible in the run-up to Christmas and doubtless many customers will have agreed in their desperation to borrow at very high interest rates. It is also now recognised that some mortgage borrowers are going to extreme lengths to meet their monthly repayments and this is before we see the real impact of rising rates.
For me, this is about the reputation of the industry. The market is competitive and it is only right that lenders are profitable and that products are properly priced for risk but it is also important that consumers value the services that are available to them.
To ensure that, it is important they believe in the integrity of the firms and the individuals they deal with. Achieving that means a combination
of both rule compliance and integrity, behaving in a professional manner and complying with ethical standards.
Richard Fox is chief executive of the Chartered Insurance Institute’s Society of Mortgage Professionals