I guess my shock was based more on the unambiguous response from a politician, as many of us had anticipated the Tory party may well take this approach. So what now for mortgage regulation?
Can I warn those who feel that regulation and compliance are a necessary evil rather than a sensible part of their sales process not to put the compliance manual away and to leave the champagne on ice. Two obvious reasons, first, nothing has changed and the FSA will push on with their regulatory updates and second, even if they are abolished following a change of Government, they will be replaced by a Consumer Protection Agency. In fact, Osborne confirmed that he wanted to give the CPA real clout to protect the consumer.
What do we have to look forward to before the next election from the FSA? Well, the review of mortgage regulation is not due to be published until September but the general direction is clear.
At a recent Council of Mortgage Lenders’ conference, FSA director of small firms and contact centre Lesley Titcomb highlighted the need for the FSA to stress-test the firms they regulate and to test capital adequacy “under extreme scenarios”.
She described it as “a clear example of the radical approach to a more intrusive style of supervision”. No signs of a soft touch there for any compliance-haters and in the current economic environment, it is worth every firm checking and confirming their cap-ad position every month.
Titcomb went on to confirm the two objectives for the future – a sustainable market and a flexible one that works for consumers. Aifa director general Chris Cummings highlighted several times the need for firms to be well capitalised, well complianced and well managed. My translation of Titcomb’s speech said exactly that as far sustainability is concerned. Flexibility that works for consumers highlighted the need for the intermediary distribution to be even more engaged with consumer needs.
The other area specifically highlighted was income verification and affordability. Titcomb posed the question as to whether this should be checked by looking at income versus expenditure. If as brokers you are not putting bank statements on file, now may be a good time to start.
Finally, the possibility of extending the approved persons’ regime to mortgage intermediaries was touched on in attempt to prohibit rogue traders.
Don’t for a second think you are entering the era of light touch. The regulator is clear they will be tightening rather than loosening their grip and much of that will help those of us who behave in a way that treats the consumer fairly and who have the right controls in place.
Dev Malle is sales director at Personal Touch Financial Services