We are all witnessing unprecedented intervention in the conduct arena of our industry.
As we have struggled to come to terms with the Consumer Duty regime, the government has been challenging the Financial Conduct Authority to intervene more robustly in a range of areas.
These include the passing-on of rises in interest rates to savers, particularly challenging the rates paid to those wanting instant access to savings.
Banks have been challenged over whom they have chosen to restrict services to.
The FCA is being asked to become an economic regulator
Finally, the launch of the Mortgage Charter brings a new landscape of intervention in what has previously been seen as a market that performs well for consumers.
This should be regarded as a new level of government policy intervention over the FCA agenda, where they are asking it to become an economic regulator and limit the ability of firms to make their own commercial decisions. This has been without applying the usual legislative or consultative approaches and is a departure that all regulated firms should be concerned about.
The Mortgage Charter requires lender signatories to:
- Commit to a 12-month moratorium on possession orders after the first missed payment.
- Permit customers up to date on repayments to: move to interest-only; and/or have a temporary term extension for up to six months without impacting their credit score.
Our discussions lead us to conclude it will be down to individual firms to decide their approach
- Enable borrowers on fixed rates to secure a new deal up to six months before their existing deal expires, including options to switch post-offer — without cost — to a like-for-like cheaper deal from the same lender if one becomes available before completion.
These voluntary arrangements are sensible and helpful to consumers in these times of interest-rate volatility and soaring inflation. However, the final benefit raises questions about who is responsible for checking for better deals, the frequency of these checks and the extent of advisers’ obligations to renegotiate a deal.
Ami has spoken with the FCA to help clarify our thinking on this. It is important to remember the charter is a ‘voluntary’ agreement that some lenders have committed to. It does not impose any requirement on the lender to review its pipeline and offer cheaper rates where they occur; rather it provides the opportunity for their customers to make such a request.
Transparency and managing customers’ expectations are key
For broker firms this presents a conundrum: what should they be doing during the time between offer and completion to monitor their pipeline and intervene if a cheaper deal is available?
Our discussions lead us to conclude it will be down to individual firms to decide their approach, considering factors such as these:
- The firm’s scope of service and consumer expectations established initially (via disclosure documents and communications) will guide future potential accountability from a regulatory or complaint standpoint.
- Firms may therefore wish to specify what services they will provide in relation to the charter, and (if applicable) at what cost, such as: checking for cheaper deals from the same lender post-offer; how frequently and when these checks will be carried out; the number of times the firm is prepared to rebroke a deal; and any cut-off date prior to completion.
- Given the varied approaches among lenders, there is unlikely to be a ‘one size fits all’ process. Nevertheless, brokers must set clear expectations with consumers at the outset, especially if extra costs will be incurred.
If a firm opts not to conduct repeated checks for cheaper deals once an offer has been made, or places the onus on the consumer, to protect itself the firm should consider how it communicates this clearly upfront. This will enable consumers to make informed decisions, in accordance with Consumer Duty requirements.
We are all witnessing unprecedented intervention in the conduct arena of our industry
Non-charter lenders are not obliged to offer access to cheaper deals post-offer without penalty, but firms should still be mindful of what they promise.
It is a Consumer Duty requirement for firms to define and deliver on their scope of service. This means they must be mindful of the wording of their service proposition to ensure it doesn’t inadvertently promise a level of service they cannot provide.
Transparency and managing customers’ expectations are key.
Robert Sinclair is chief executive of the Association of Mortgage Intermediaries
This article featured in the September 2023 edition of MS.
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