HBOS’s retention policy has been hit by a double-barrelled assault after the FSA confirmed it will probe the payment of proc fees while Nationwide slammed the scheme.
The FSA will investigate whether brokers are correctly conducting the fact-find when they are paid a proc fee on retention business. It will form part of the retail distribution review.
Other lenders that pay retention proc fees include Accord, First Active and Woolwich.
Some market figures have called for lenders to adopt a profit-sharing model to help retain customers, as introduced by new lender Basinghall Finance this week with its distributors John Charcol and Savills Private Finance.
FSA spokesman Robin Gordon-Walker says: “We are looking at mortgage retention fees but it is one of many areas and we are not singling it out. Advisers have to give the right advice regardless of the remuneration system.”
Nationwide commercial and communications director Stuart Bernau says: “The HBOS initiative has not worked and has not been followed by the rest of the market and has ended up with poor products. We are working on maintaining intermediary relationships but not necessarily through proc fees.”
HBOS spokesman Paul Fincham says: “The proc fee for existing customers goes hand in hand with stable advice.”