The Association of Mortgage Intermediaries (AMI) has condemned the FSCS levy for 2021 saying mortgage brokers should not be asked to pay for “bad pensions and investment advice".
According to the Financial Services Compensation Scheme’s 2021/22 plan and budget out this morning (January 22), mortgage brokers will be charged £23m towards the levy, more than seven times the £3m they were charged last year.
Overall the FSCS levy will break through the £1bn barrier for the first time amid further increases in complex pension claims.
Robert Sinclair, chief executive of AMI, described the size of the levy as a “new low” for financial regulation.
He said: “The dire discovery that the investment and pensions sector has been blind to widespread fraud and poor advice needs direct action by the industry.
"Asking mortgage brokers to pay more for bad pensions and investment advice than they are levied by the FCA for their own regulation is nothing short of a disgrace.”
Mr Sinclair added: “On behalf of ordinary advisers who will have to find this money at a time when doing their job could not be harder, AMI requests that the review of future regulatory framework is expanded to look at how we develop a new approach that gives proper scrutiny of how firms are able to operate within the UK regulatory framework.”
Martin Stewart, director at London Money, similarly said the industry was paying for the mistakes of others and warned of an “extinction level” event.
He said: “The cost to trade is rising exponentially at a time when there are continual pressures to reduce the cost of giving advice. When two linked events start to move rapidly away from each other then we have to recognise there is a problem.
“It is far too easy to do bad business in the UK and it is far too easy to get the good guys to pay for it. Layer in the fact that the PI market is at breaking point and one of the few solutions to the problem could be a consolidation and concentration of advisers into larger, well capitalised businesses.”
Meanwhile Dominik Lipnicki, director at Your Mortgage Decisions, described the sevenfold increase in the FSCS levy for mortgage firms as “utterly baffling”.
He continued: “Surely they must realise that many firms have faced huge issues during the pandemic and that increase may well cause further firms to fail, is the answer then to increase the levy even further?”
While Mr Lipnicki acknowledged the importance of the FSCS and the need to fund a predicted increase in claims, he said that “[burdening] mortgage firms with a seven times increase [could not] be the answer”.
Andrew Brown, managing director at Bennison Brown, also said it was a surprise to see the levy increase to £23m.
He added: “[Our] understanding is the levy is based on a prediction and I hope the prediction is proved to be floored as brokers continue to support their clients during these challenging times by writing high quality business and providing excellent advice.”