The Financial Conduct Authority’s first Financial Risk Outlook and Business Plan highlight time and again the regulator’s intended new approach to its overall role, all of which will affect all those working in the mortgage market.
You can expect the FCA to be a more proactive and interventionist regulator. The Business Plan describes a supervisory approach built around treatment of customers and takes into account product design and business model as much as sales process.
Generally, it is predicated that if firms adopt a customer centric approach in their corporate culture in the first place, that includes positive selling practices and approach to improving the customer’s situation, then complying with the new structure should be straightforward.
The Mortgage Market Review enjoys pride of place in the consumer protection section of the Business Plan, with plans to engage firms through a stepped-up roadshow programme and workshops, a programme that we would encourage everyone to attend, as well as online surveys and MMR readiness tracking starting in Q3 of this year.
The published Q&A that came out in mid-April also ties up some loose ends from the last MMR policy statement and is well worth a read.
One of the key issues for the Society of Mortgage Professionals is that of professional standards which, under the MMR, changes the scope of who needs to be professional qualified to a level 3 standard.
A positive from this work is confirmation that the mortgage qualification syllabus will be undergoing a review, something that has not taken place since 2004.
This review of the syllabus will also be possible now that the compromise agreement between the European Parliament and the European Commission on the Mortgage Credit Directive was announced on 22 April. This will clear the way for the introduction of the EU’s first mortgage legislation.
Lenders will need to comply with performance quality standards for staff and the directive sets out the fields in which employees are to possess an appropriate knowledge and competence.
While many of these provisions are already included under the new MMR, the European directive provides additional clarity.
All these developments together indicate a tougher stance from the regulator that will be focused on far more than just rules. It promises a better culture and will strive to play a stronger role in changing performance and improving consumer outcomes.
Whereas previously, firms were regulated through rules and principles, the FCA plans to take a more holistic view of how firms are treating their customers.
Laurence Baxter is head of policy and public affairs at the CII