FCA weighs post-RDR building society distribution models

City watchdog the Financial Conduct Authority is monitoring changes to building society distribution models in the wake of the Retail Distribution Review amid concerns over the use of unregulated intermediaries, Linda Woodall has revealed.

Ms Woodall, head of mortgages and consumer lending within a new four-strong team of supervisory directors, discussed post-2012 distribution in a speech today to the Building Societies Association.

She said the FCA was “interested in the changing distribution models in mutuals, and how they may translate in practice for customers”, including “changes in the post-RDR investments and complex savings space”. Ms Woodall added that the FCA was also scrutinising the “increased use of unregulated mortgage packagers” by building society lenders.

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This, she said, is one of the wider issues the FCA is focusing on as part of its ‘judgement-based’ and ‘outcome-focused’ approach that has been implemented since the birfurcation of the Financial Services Authority earlier this year.

Among a number of more immediate concerns, Ms Woodall pointed to the FCA’s previously announced thematic review into complaints handling by larger firms, including building societies and banks.

She said the volume of complaints going to the Financial Ombudsman Service suggested complaints handling was not being well handled and said that the review would seek to “identify why complaint handling is not working well”.

The regulator will “place greater onus on ‘senior persons’ to understand how effective their firm’s complaints handling process is, and how they use the complaints experience to identify and correct the systemic causes behind customers’ complaints”, she added.

Fos data published today (3 September) show that the service dealt with more than 327,000 cases in the first six months of 2013. As would be expected, the top 10 list of most complained about firms was dominated by banking groups.

Ms Woodall also said the FCA was continuing to “evaluate” how societies are gearing up for the changes coming in April 2014 under the Mortgage Market Review. She said the regulator would imminently be launching the “second wave of readiness testing” and that it will conduct “substantive post-implementation testing after the new rules come into effect”.