The Association of Mortgage Intermediaries has slammed the FSA for excluding contract variations from the non-advised sales ban.
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 was any form of “interactive dialogue” between a customer and a lender.
Lenders raised concerns about administrative staff being captured by the proposals in the December paper 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 a policy document published today, which outlines the FSA’s final rules for the regulation of the mortgage market, the regulator confirmed that sales would 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. Forbearance would also be exempt from the non-advised ban.
Furthermore, lenders will be able to write to a customer presenting all of the products available to them and it will be accepted as a non-advised sale as long as the lender does not “steer” a customer towards a certain product and the customer makes up their own mind.
Ami chief executive Sinclair says: “I genuinely think this will be bad for consumers and the FSA has not gone far enough. I remain to be convinced this is enough to protect consumers. I think allowing a consumer to just tick a box without fully understanding the consequences is a weakness in the proposals.
“Lenders will not have to do an awful lot when a borrower comes to the end of a loan, they just have to make them aware of the products available and then the customer picks. I think that is a bit weak.”
The new MMR rules come into effect on 26 April 2014.