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MMR: FSA rubber stamps ban on non-advised sales

FSA Sky 480

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 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. Forebearance would also be exempt from the non-advised ban.

The FSA has also slashed the income limit of a high-net worth mortgage customer from £1m to £300,000 and formerly recognised that borrowers in this bracket will be able to opt-out of receiving advice

Sheila Nicoll
Sheila Nicoll

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 borrwer’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 don’t necessarily have to go through the whole advice process.”

The Association of Mortgage Intermediaries has slammed the FSA for excluding contract variations from the non-advised sales ban.

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.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. I agree with Robert Sinclair on this. The FSA have not “Stood firm” at all. They have been conned by lenders into believing that existing borrowers do not need advice on product switches.

    That is plainly wrong.

  2. It is common sense to be fair! Why would you need advice if you have a mortgage and your fixed term finishes. You have a look at the best deal your lender has i.e. the amount you pay per month and then choose that one.

    No doubt you would like that consumer to pay you for doing that – thats where the rip off comes in!

  3. No. I would like the lender to provide advice or to pay us for doing so.

    As things stand, lenders do not provide the advice so I am often asked to do so, pro bono, which I reluctantly do.

    So who is doing the ripping-off there, Anon?

  4. Why is Sheila Nicoll still at the FSA? surely she should have gone with her chum Hector Sante.

    The fact is Sheila Nicoll was part of the organisation that was responsible for tick box regulation and did little to govern the banks correctly.

    These initial proposals were welcome by brokers as many individuals amending a mortgage, do need advice as they are too often ripped off by banks. The fact is banks and building societies will use these watered down proposals to carry on giving terrible advice or should I say non advice to millions of consumers. Which I’m afraid may also mean that we end up repeating the mistakes of the last 30 years as soon as they have repaired their balance sheets and feel it’s safe to return to reckless lending.

    The fact is that these initial proposals forced banks to provide better training to it’s staff and also to work in partnership with brokers. I don’t know about everybody else, but over the last 5 years, the major four banks have consistently launched direct deals in an attempt to put brokers out of business. The fact is with these new proposals banks would have needed us as they were ill equipped to fill the advice gap.

    Get rid of Sheila Nicoll as she obviously is not on the IFA’s side and is quite biased towards lenders.

  5. Lenders again are not on a level playing field ….its not about fees or rip offs how about best advice and informed choice …. a product transfer needs to be documented …..the client may be advised not to given any number of cicumstances ohh but the lender can simply add on the £199 £399 £999 of course with no questions asked or raised

  6. Anonymous | 25 Oct 2012 9:14 am

    So you wouldnt like the best deal out there for your circumstances at the time the fixed term finishes.

    I suppose you are one of these individuals who thinks being people being paid for advice is a rip off!

  7. Why is there no outright ban on non advised investment sales. The banks are still allowed to offer non advised products and get paid commission? Fair, think not. A small amount of money spent on RDR and the banks still tell the FSA how they want to run their businesses and the FSA, just roll over and say thanks for the fees

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