The Financial Services Authority will punish several mortgage firms after research showed that only one third of the firms it sampled had robust processes in place to provide customers with suitable advice.
The FSA reviewed 252 firms of differing sizes through mystery shopping, visits and questionnaires between June and October last year to establish a baseline of the process by which advice is delivered in the mortgage industry.
The failings were significant in a number of firms and it has referred several for enforcement.
The results showed that small firms need to implement systems and be able to show they use them. Whilst larger firms generally have robust processes in place, they could not always demonstrate that they are using them.
Scope for improvement was found in all aspects of the advice process. Some of the poorer areas identified were the assessment of customer needs, including affordability, training and competence, overall systems and controls, and record keeping.
Managing director of retail markets Clive Briault says: “We found significant failings in the advice giving processes in a number of mortgage firms. Poor processes increase the risk of unsuitable advice being given. It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice.”