The FSA has stood firm on its proposal to ban non-advised mortgage sales, but has carved out administrative changes to existing mortgage contracts from the new rules.
In its last mortgage market review consultation paper, which was published in December, the FSA proposed that non-advised sales should be banned where there is any form of “interactive dialogue” between a customer and a lender.
Lenders raised concerns about administrative staff being captured by the proposals and have lobbied for an exemption to be made for these people.
They also argued the rule would contradict the FSA’s approved persons rules, which state back office staff and those involved in post-completion activities would not have to be individually registered.
In the FSA’s final MMR rules, published last week, the regulator says sales will only have to be advised if the lender has “steered” a customer towards a product or set of products, or where the customer wants a further advance.
As long as the consumer does not want to borrow more, contract variations like changing the payment method, rate switches and retention deals or porting the mortgage can be done on an execution-only basis. Forebearance will also be exempt from the non-advised ban.
The paper says: “Our view is that where it is a simple product switch and nothing more, it would be acceptable for the lender to act on the borrower’s instructions over the telephone, or in the branch, and proceed on an execution-only basis.”
FSA director of conduct policy Sheila Nicoll says: “It is common sense in that clearly if something is a straightforward matter, then you do not necessarily have to go through the whole advice process.”
Coreco director Andrew Montlake says the FSA should have implemented a blanket ban on non-advised sales. He says: “It seems the FSA has gone a long way to ensure consumers are protected and get advice but have tripped at the last hurdle. It is a shame it did not go the whole way and make sure consumers are fully protected.
“When it comes to contract variations or getting a new product, a lot of borrowers will just look at the cheapest rate and take it without understanding that it might not be the best product for their circumstances. That is why the FSA should have gone all the way and completely banned execution-only.”
The new MMR rules will come into effect on 26 April 2014.