Regulation & Protecting the Consumer
On
October 31 2004, the mortgage business became a regulated industry. The
organisation given the responsibility to authorise and regulate mortgage
intermediaries is the Financial Services Authority (FSA), and their powers are
supported by legislation (Financial Services & Markets Act ).
So, what does this mean to you, the consumer?
The FSA’s objective is to rid the industry of rogue players who
tarnish the mortgage industry’s reputation. In doing so, they aim to reduce
financial crime and improve consumer confidence and understanding of the
mortgage market.
How will they do this, I hear you ask?
First of all, individuals and firms intending to give mortgage
advice will need to be authorised by the FSA. The authorisation process can
take up to 6 months and involves certain criteria being satisfied. For example:
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The business needs to be run by persons deemed to be fit and
proper.
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Procedures prescribed by the FSA need to be observed, ie on
handling complaints.
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Specific rules exist on offering advice and fee
charging.
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Staff providing advice need to be suitably trained, qualified,
and supervised.
-
Prescribed documentation needs to be produced and provided to
the consumer so that all costs and charges are fully transparent.
So what will our fee charges be?
Since we are mortgage brokers with no bias towards
any particular lender, the FSA prescribe that all mortgage brokers
offer their clients the opportunity to choose how they pay for mortgage advice.
The reason that the FSA have done this is because lenders will pay commission
to mortgage brokers for cases that are placed with them. Therefore, in order to
discourage a broker from recommending a lender purely on the basis of who pays
the highest commission, the FSA have stipulated the rules on fee charging.
Details of the choice of fee payment are shown in the Initial Disclosure
Document (IDD).
So, what is an Initial Disclosure Document (IDD)?
The advisor must produce this document
for you at the outset, and this sets out our status
as an advisor, the services we offer and the payment options
available. This is an FSA requirement.
1st UK Mortgages fully support
the Financial Services Authority and endorse the work that
they are doing.
Please
ask your mortgage lender or mortgage intermediary if you would like
a copy of the full FSA code.
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