CML response to FSA consultation on distribution and disclosure

The Council of Mortgage Lenders has today submitted its response to the FSA's consultation on mortgage distribution and disclosure (CP10/28). While the CML attempts to give a comprehensive response, it also cautions that it is difficult to give firm views on how, or whether, the market impacts of the proposals will deliver the FSA’s proposed outcomes of sustainability for firms and flexibility for consumers in the absence of final decisions on the responsible lending and affordability proposals in CP10/16.

The CML therefore urges the FSA to undertake a new, full consultation on all of the related policy proposals, together with draft rules, to ensure consistency and a proportionate intervention overall. The MMR proposals in this consultation and the earlier one on responsible lending go too far, and the rules do not accurately reflect policy in a number of important ways.

On the specific proposals, the CML says that:

• There is a risk that the single standard proposed by the FSA to cover both advised and non-advised mortgage sales will create as much confusion as it seeks to resolve. Consumers will become more likely to believe that they have received "advice" when they have not, and to become more passive in their role in choosing a mortgage, as a result of the narrowing of the differences in the sales process. In effect, the CML believes that the rules as drafted will introduce an advice-only sales process in all but name, which gold plates the approach expected in Europe.
• The proposals are likely to increase firms’ costs and reduce consumer choice about how they buy their mortgage. Performance data shows that non-advised and execution-only sales have produced perfectly good outcomes for the vast majority of borrowers who have chosen them, so the proposals appear disproportionate and remove rather than enhance flexibility for consumers.

There is broad agreement within the industry, noted also by the Association of Mortgage Intermediaries, on the core concerns arising from this paper.

Commenting on the proposals, CML director general Michael Coogan observed:

"Responsible lending and distribution are inextricably linked so dealing with possible rule changes in separate consultations helps neither the FSA nor the industry take a coherent overview of the impacts of the mortgage market review. From what we have seen to date, we believe the interventions proposed are disproportionate and not backed by the evidence. We stand ready to work with the FSA on a set of rules which should deliver their policy outcomes, and would deliver real benefits to borrowers in the future.”