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‘Weak’ FSA exits without action

The FSA says it has achieved its aim with its probe into mortgage exit fees despite brokers branding it weak for failing to take action against lenders that continue to charge excessive fees.

The Mortgage Practitioner sole practitioner Danny Lovey says the regulator has gone against everything it said in its statement of good practice published on January 26 (see box).

The FSA said last week it will not be rapping banks over charges, saying the report was only designed to be “an analysis of what lenders have told us they will be doing”.

But Lovey says: “It goes against everything they said and looks pathetically weak.”

He has called on the Association of Mortgage Intermediaries to lobby the FSA to take action against lenders such as Alliance & Leicester which continue to charge exit fees of up to £295.

But AMI deputy director general Fay Goddard has rejected the call, saying: “The FSA is not, nor should be, an economic regulator as this would stifle innovation and reduce competition. The pricing of products varies by lender and is highly complex. Good intermediaries will source the best deals for their clients.”

John Charcol senior technical manager Ray Boulger says the fact that many lenders scrapped their fees could be seen as an admission they could not justify the size of the fee to the FSA.

He says: “This seems to me to be tantamount to admitting that the now abandoned fee was unfair.”

Boulger believes it would be simpler and more transparent if lenders amalgamated all these charges into one fee – the arrangement fee. He says “The FSA should consider this. They are not an economic regulator and so will not specify how much a fee should be but they could insist that these fees are all wrapped into one on the basis it would be a much better way of meeting their legitimate requirements for transparency.”

An FSA spokeswoman says: “The main point for us is that exit fees are now clear and transparent. The customer is aware of what fees they will be charged so it is up to them whether they take the mortgage or not.”

January 2007 FSA statement of good practice on Meafs

“In our view, if a Meaf term is drafted to enable the lender to recover the cost of the administration services which a lender provides when a customer exits the mortgage, the lender should ensure that the Meaf represents in fact the cost of the lender’s administration services. A failure to do so is also likely to be a breach of contract.”

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