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Govt refuses to intervene on dual pricing

The Government has refused to intervene on behalf of mortgage brokers to stop banks from dual pricing, saying pricing remains a commercial decision for banks and building societies.

More than 2,000 mortgage brokers petitioned the Government in May calling for it to prevent the banks from offering cheaper prices on direct-to-consumer mortages.

The petition states: “We the undersigned petition the Prime Minister to create fair pricing policies to prevent banks pricing interemdiaries out of the market.”

The Government has responded, saying pricing decisions and mortgage terms and conditions “remain commercial decisions for banks and building societies”.

It also says state-backed financial institutions are run in a way that provides value for the taxpayer and states it is unwilling to intervene in commercial decisions.

The Government says: “UK Financial Investments Limited, on the Government’s behalf, manages the stakes in financial institutions that have benefited from public sector investment. UKFI is required to operate at arm’s length from HM Treasury, and manages the public’s stakes in banks on a commercial basis, with the objective of protecting and creating value for the taxpayer as shareholder.

“This means that even where public money has been made available to banks, the Government does not seek to intervene in commercial matters such as pricing or product design. To do so would be contrary to this principle of independence, and may be anti-competitive or distort the market.”

The Government says it remains committed to promoting understanding of the financial system and raising levels of financial capability across the UK.

It says: “The Coalition Government views the roll out of a free and impartial national financial advice service by the newly established and independent Consumer Financial Education Body as vital in achieving these aims.

 “We believe that private intermediaries also have an important role to play and that a free national financial advice service will be beneficial to both consumers and the financial services industry as a whole.”



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There are 21 comments at the moment, we would love to hear your opinion too.

  1. TCF anybody?? What a joke..

  2. So much for treating customers fairly…I have seen a good number of clients that have been direct to banks and building societies and the quality of advice and the way they are pushed down a route of price over the right concept for the customer is appauling. No wonder they are always being fined. No doubt dual pricing is here to stay because the advice given does not stack up against an experienced broker so by offering incentives like these are the only tool l;eft available for them to get business.

  3. Douglas Shillinglaw 20th August 2010 at 5:25 pm

    What the government really mean is that all they are interested is that lenders recapitilise their books (especially the ones they own) & they do not care if clients need to seek independent advice. The old-boy network for some people at the FSA, government & the lender strikes again!

  4. “Govt. refuses to intervene in dual pricing!” Ooh didn’t see that one coming ! It’s right up there with the FSA not taking action against Skipton for it’s shameful removal of its SVR guanrantee & hiking the rate by 1.5%! Anything that requires tough decisive action can be relied upon to be bottled by the Govt and / or the FSA !

  5. “We believe that private intermediaries also have an important role to play and that a free national financial advice service will be beneficial to both consumers and the financial services industry as a whole.”
    What is free about a service we are paying for?
    Also if intervening on pricing is wrong-what is all the fuss about commission?
    Plonkers the lot of them.Vote for UKIP

  6. Why as a broker do I continue to spend hour upon hour attempting to satisfy my Network and the FSA in regards to their TCF guidelines and ridiclous requests, when it is clear with a decision like this that the Goverment/FSA really has no interest in protecting the consumer, just redeeming the balance sheets of the banks. This decision is loaded towards the banks and will continue to disadvantage consumers.. Shameful

  7. The Government has said that pricing decisions and mortgage terms and conditions “remain commercial decisions for banks and building societies”.

    Well that’s interesting, because when it comes to life companies they get stakeholder products foisted on them, whilst IFA’s get the FSA questioning our hourly fee rates. So it really is one set of rules, namely virtually none at all, for the banks and building societies, but quite another for the rest of us.

    It also explains why the government can’t get the banks to lend more to businesses ~ the banks simply price beyond affordability the deals that they are prepared to offer and then claim that they’re making the offers but businesses aren’t taking them up.

    The Government says it remains committed to promoting understanding of the financial system and raising levels of financial capability across the UK. Oh yeah? Then what about simplifying a few things, starting with pensions, as the Conservatives promised to do in the run up to the election?

    As for the “free and impartial national financial advice service by the newly established and independent Consumer Financial Education Body”, this rather crassly overlooks the fact that those of us in the financial services industry are the ones who are going to be forced to pay for it, i.e. paying to fund a government body to which people will go instead of coming to us. How [insert your preferred adjective here] perniciously ironic is that? You couldn’t make it up.

    However, authorisation via a non-UK regulator, as things presently stand, means that you won’t be forced to pay towards the CFEB, because the levies for that are to be added to your CPMA levy. Why stay?

  8. I thought our Government was going to be competent enough to think further than their noses… If we have nothing to do because the consumer go straight to the lender for their cheaper deals we are hardly going to be around for much longer , whether we are regarded of being of some or much use.

    If nothing else, does not the Coalition Government want us at least to be around to pay for their “roll out of a free and impartial national financial advice service”?

  9. Ancient a mortgage broker in N3. 20th August 2010 at 6:32 pm

    Who started the ridiculous idea of thinking that dual pricing is a government issue and they will back brokers? What a joke – it makes brokers look so desperate. We are shutting up shop end of 2010 – Why? – Mortgaege broking is on the way out – extinction within 2 yrs as lenders just use brokers for new clients – then dual price brokers out after they take them on.

    Wake up and smell the coffee brokers!

  10. Hang on, brokers weren’t complaining when the banks were offering cheaper deal via intermediaries than the branch networks. This is entirely a commercial decision for the banks and a government intervention in private business would represent some of the worst elements of socialism. I’m afraid it’s a case of adapt or die and if you can’t be bothered to adapt and if you are stuck in your ways are going to die, please do it quietly.

  11. illegal : illegal : illegal. Funy how governments can interpret law differently when they want to. What I do not understand is why they want to interpret this decision in the way that they have. That tells me they actually have a grudge to bear against brokers. Why do we deserve this?

  12. If they want the consumers to be educated re financial advice/mortgages and the peeople giving this advice must be qualified why do let products that we have to be qualified to give advice appear on comparison sites.

  13. 3.5% arrangement fees – same if not worse exit fees, Commission on insurances ‘sold’ on a ‘if we don’t buy from the lender at the point of sale we might not get accepted for the loan’ etc etc. TCF is a joke.

  14. Crazy gang IFA member 21st August 2010 at 11:07 am

    What utter B………ks!! So what have the FSA been doing since they were set up then???? Unbelieveable !!!

  15. Oh my gosh. What a shock. Didn’t see that one coming.

  16. Sorry I don’t see a problem. I would expect it to be cheaper if I went direct and more expensive if I took “advice”.

    Rather than complain about this the question should be asked as to what right the Government (FSA) has to interfere in other commercial areas ( commission. platform charges, exam requirements)

    How about letting free market forces decide ? a novel idea for the coalition perhaps ?

  17. This dosen’t change things. Intermediaries need to give an Advsory Proposition and charge for it! What does concern me is the practices of the Lenders in relation to completing AIP’s and DIP’s for clients who do not even realise the consequenses of their actions in doing this in reltion to creating Footprints on the clients file and also making them think that there is nothing else available to them. It is far from TCF to put clients ia “KEEP NET ” just to ensure they they might think that they do not need to speak to anybody else.

  18. “This means that even where public money has been made available to banks, the Government does not seek to intervene in commercial matters such as pricing or product design. To do so would be contrary to this principle of independence, and may be anti-competitive or distort the market.”

    If Governments really believed in this why didnt they let the banks go to the wall?

  19. This is a variation of something else I posted on the sibject.
    Dual Pricing is wrong, but I think it’s too easy to get focused on adviser detriment and not step back and look at potential solutions. The system at the moment with dual pricing is detrimental to consumer sand advisers I agree, but the system before was flawed too.
    I think the issue is not about proc fees (commission), but the pushing of “non advised” when clearly this should be discouraged and the exception rather than the norm for what is after all an individuals most expensive purchase of their life.
    We are predominantly investment advisers. Non advised/execution only investment advice and it’s like is thoroughly discouraged and looked at more carefully by the FSA and FOS (often even with non advised, the FOS will find in the clients favour for unsuitability). When you think about it, the risk to a client of getting things wrong with their investments is miniscule when compared to the risk to their home and why advice is so important and should be encouraged (hence why focus on reducing non-advised sales is correct I think and where an argument could be won with the FSA, not the proc fee/dual pricing issue per se)

    1. Would a better solution be, that a lender could only offer a “non advised” product if FSA rules meant the product had to be made available as a NO proc fee broker deal as well so that an independent broker could obtain a KFI and be involved in the client process? Look at this from the consumer perspective for a minute and ignore what may or may not be good for the broker….. This gives the consumer the right to the deal being scrutinized, but at their own cost by giving them the right and ability to seek advice from their agent rather than the agent of the lender (don’t get me started on using general powers of attorney to wind up the lender). It still leaves the problem of how the client pays the adviser, but it puts the choice in the consumer’s hands.
    2. If we agree there is merit in removing dual pricing, standardize proc fees if necessary to remove any element of “commission bias” ( 0.35% across the board would be fair enough as far as I’m concerned)”, but we need to remember that historically, firms like C&G and Nationwide did NOT pay any proc fee and yet we used to advise them to use those lenders as we made our money then on the cross sales. From that perspective, I think we may never return to standard proc fees, so could the FSA instead put in place a requirement that providers allow “adviser charging” through the contract? For those of you not IFAs, the commission/fees argument with IFAs in the RDR may not be as it seems as adviser charging allows a cost for advice/work to be agreed with the client and then the client/adviser agree whether it is paid by cq by the client or deducted from the contract and a lot of providers allow this now. This does remove commission bias and is one of the bits of the RDR I actually agree with as the provider cannot influence advice by upping commission as everything is agreed with the client and the provider has no influence but just takes what is agreed from the contract. There is also talk about bringing in “decency levels” so that this cannot be abused i.e. reporting an adviser charge of a certain percentage or more, say 10%, but still allowing it while expecting an FSA visit or call to explain why you’ve done it. My point is, that with many mortgage completion and discharge fees being chargeable at mortgage completion, but not being paid until mortgage redemption, could allow adviser charging to be made part of the responsibilities of the lender if they wish to offer certain packages? In this example, the adviser could charge 0.35%, 0.5% or whatever is agreed with the client, but if an indecent amount, they’d know big brother (FSA) would look in to it…
    As an IFA who is authorised and qualified to advise on mortgages, I feel I do have to consider, discuss and recommend direct deals (never done one for one reason or another), but I do recognise the problems with this when lenders will not give the info in order to provide accurate KFIs which is why as BR also did, when direct deals first started to be an issue, many advisers (including me) gave Lesley Titcombe at the FSA grief over it (to no avail), but due to lack of mortgage business and plenty of investment, I have not really pushed the issue since.

  20. Is should be no surprise that the Government will not intervene in dual pricing, we operate in a free market and it should remain that way.
    Denying brokers the ability to act as the customer’s agent in arranging a direct mortgage is, in my opinion, completely wrong and to the customer’s detriment as by cutting brokers out the lenders have an opportunity to unscrupulously sell their own expensive products to customers. How many times have we heard that customers are led to believe that buying B&C and life cover will enable them to qualify for a mortgage?
    If the FSA wants to see customers treated fairly then they should make it a requirement for all regulated products to be available through intermediaries. We may have to accept that we won’t get paid for some mortgages but we get a chance at the cross sale and we have the option to charge a fee if the client perceives it worth paying. Dual pricing would disappear overnight as lenders realise their margin comes from the mortgage and if they want a slice of the protection market then they need compete on price instead of customer ignorance.

  21. The argument is being centred around the commerciality of Banks and free trade. However this is the UK apparently with a wonderful system championed by the FSA that allows consumers to use an independent financial adviser for impartial advice. If it allows companies to ‘cut out the independent financial adviser’ route is it not failing and dare I say it failing to ‘control;’ the distribution that it set out to create?

    If the product is fair and costed by the company it should be available (distribution channels) via an IFA with IFA having to charge directly for his services. Is that not too much to ask and will not the public think that’s how they thought it was meant to be??? The ‘direct’ channel is still open but the FSA implements rules that products sold in UK complies with the requirement that it must be available through IFAs (How can an IFA inputting the data be any more costly to the company than the member of the public himself?) Or are there more sinister reasons affecting the profitability of dealing direct??!!

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