The FCA is encouraging firms to register early to assist in the migration from the OFT all those firms covered by the Consumer Credit Act.
While this will have limited impact for investment, mortgage or insurance intermediaries, it will bring about significant change for the second mortgage market. The other group it is likely to have most impact on is the FCA itself.
This will be the first real test of the new regulator. It has promised to be different and better than its predecessors but its scope and reach is about to be severely tested. Credit comes with some big rocks to be lifted and some dark creatures underneath.
Its first challenge will have to be payday lending. These are businesses that currently might leave a nasty taste in the mouth but do broadly act within the law.
But to deliver consumer protection, some protracted legal battles loom which will stretch further the FCA’s limited resources. These changes will also bring the world of bridging finance closer to a unified approach.
Because of the concurrent implementation of the European Mortgages Directive, how second charge loans are incorporated into the full mortgage regime risks forcing the need to consider a further advance or remortgage in all cases, so strangling this specialist sector.
Further, how a new unitary consumer credit authorisation might operate versus the multi-dimensional approach previously favoured by the OFT remains to be seen. There are more sub-sets in consumer credit than in the current core investment, pensions, mortgage and insurance regimes.
All this presents significant challenges without lifting the lid on the debt management sector, which many feel might be another area of serious consumer detriment.
The FCA operates under a new legal mandate where it must protect consumers. A conven-ient approach might be to apply a stronger competition flavour to its actions as it would be easy to try to drive transparency and disclosure as a means to promote more competitive markets. In theory this should work and in consumption economics and marketing it tends to. However, financial services is a barrier, service product set where consumers apply different values and judgements that do not naturally lend themselves to this. Service economics and marketing is just different, subject to totally illogical human decisions.
In addition, the AMI is looking to get mortgage brokers removed from the consumer credit regime unless they are undertaking specific lending activities. Where they only hold the licence to discuss or consolidate unsecured consumer credit, this should be covered within MCOB and their mortgage permissions. This would simplify the landscape considerably.
Credit issues are framed on well tested legal precedent. In moving this regime, assurances have been given about some of the important protections to consumers afforded by the current legislation. These are complex issues on consideration periods, cancellation rights, purchase protection and early redemption protection. The Ami and the AFB are ready for the discussions.
Robert Sinclair is chief executive of the Association of Mortgage Intermediaries