Small mortgage brokers and networks have been fiercely criticised by the FSA and threatened with enforcement action for multiple failings across many areas of mortgage advice.
The regulator’s quality of advice probe found that more than 75 per cent of small firms sampled ran the risk of giving unsuitable advice because of a lack of robust processes in place.
The Association of Mortgage Intermediaries has pledged to help improve standards but says that the FSA must do more to communicate its requirements to small firms.
Bigger intermediaries and lenders also came in for criticism but they fared significantly better overall.
However, only one-third of the 252 firms sampled in total had robust processes to ensure that correct advice was given.
The FSA will revisit some of the firms identified as having problems in six months and will “investigate this area in future”. However, the failings were significant in a number of firms and the regulator has referred several for enforcement action.
It lists the assessment of customer needs, including affordability, training and competence, overall systems and controls, and record-keeping, as areas of most concern to the industry.
In October, Money Marketing revealed that preliminary results from the regulator’s probe indicated that the final results would be poor.
FSA managing director of retail markets Clive Briault says: “It is essential that firms have robust processes in place so they treat their customers fairly and provide suitable advice.”
AMI associate director Rob Griffiths says: “The results of this study could indicate the need for the FSA to increase its visibility among small firms and send out a clear message to the industry that no firm is below its radar.”
Sesame chief executive Patrick Gale says: “It is important that the FSA and the big players are constructive and measured in their responses. Small directly authorised mortgage firms need help and support, not brickbats.”