The Financial Conduct Authority is not keen to be any more prescriptive on how mortgage intermediaries make consumers aware that conversations are actually advice.
Speaking to FTAdviser following the publication of its review into the quality of mortgage advice, the FCA’s acting director of retail lending Philip Salter said that since the Mortgage Market Review firms have been working on improving clarity, so there was no need to update the rules.
Alongside the review was a research paper which went into more detail on consumer confusion about when advice is being given and how this can lead to questions being interpreted as an attempt to catch consumers out.
Often the actual lending decision was perceived as being advice, or introductory information gathering was taken as something which sought to find them ineligible for a mortgage.
“When ‘advice related’ questions are interpreted as ‘eligibility questions’, there is a strong feeling that these questions can be answered “incorrectly” and that this could limit access to a mortgage,” explained the report. “This is compounded by the fact that consumers are under the false impression that lenders are not allowed to give advice and do not feel they have the customer’s best interests at heart.”
The FCA’s review found that firms adopted contrasting approaches to dealing with initial customer enquiries.
Some firms had strict controls on the boundaries between providing advice or information, while others were more receptive to the information needs of customers, but advisers were often unclear as to whether or not they were providing advice.
Paul Mountjoy, one of the authors of the report, explained that all staff should be able to provide basic information and point consumers towards places they can research products further, but admitted “there is a lack of clarity on where this turns into regulated advice”.
Mr Salter said that he hoped the report would go some way to improve the clarity between moving through the various stages of the mortgage application process and that all firms reviewed were given separate feedback on issues encountered during the process.
He admitted that the MMR has definitely increased the length of conversations that took place, but that “we don’t mind about that”, as it is important that advisers are able to get across the full scope of what consumers need to know. “It could be done slicker though,” he added, noting that there should not be such “horrendous” affordability checks.
After only a year under the new rules, Mr Salter said there was not enough data to support a definitive statement that the MMR has improved customer outcomes, but commented that the mystery shopping figure of 38 per cent of cases where the regulator was unable to determine whether the mortgage recommended was suitable “wasn’t that far away from our expectations”.
He added that the FCA would be “disappointed” if the statistic of 59 per cent of mystery shops and files reviewed resulting in suitable mortgage recommendations to customers remained the same in a few year’s time.
peter.walker@ft.com
