The FSA is proposing that firms explicitly disclose to customers whether they will consider direct deals as part of a series of measures which will form part of the Mortgage Market Review.
Other proposals, published today, include replacing the existing labels used to describe a firm’s service with the Retail Distribution Review’s “independent” and “restricted” labels.
The regulator estimates one-off compliance costs to the industry of between £39m and £50m along with £2m in annual costs.
Firms wanting to be independent must source products from a “comprehensive and fair analysis of the relevant market”. The FSA classifies the mortgage, equity release and sale and rent back markets as seperate.
Firms will not have to advise on direct-only deals to remain independent but will have to make it clear to clients that they do not include such deals in their service. Firms will not have to offer a fee-option to remain independent.
The FSA will also remove a barrier for brokers to advise on direct-only deals by removing the requirement to produce a Key Facts Illustration on such deals. Instead firms will have to keep a record of the advice and provide clients with a durable copy of this record.
The regulator is introducing a minimum qualification level for mortgage advisers at QCF level 3, replacing the initial disclosure document with a requirement to disclose key information about how the intermediary will be paid and changing the point at which a KFI is provided to prevent overloading the customer with information.
FSA director of conduct policy Sheila Nicoll says: “This next step of the Mortgage Market Review recognises the importance of the intermediary and ensuring the quality of every mortgage sale. It also indicates how the intermediary and other sales staff fit into our vision of a sustainable mortgage market that works well for consumers.
“By clarifying the role and responsibility of mortgage sellers, we are removing the blurring that could take place between the role of seller and lender.”