Mortgage brokers should take a "rigorous and industry respected" qualification in treating customers fairly after it emerged two firms had been fined and another handed a public censure by the FSA for management failings.
The ifs School of Finance says the reprimands underline the importance of TCF and points out courses like its Certificate in Regulated Customer Care (CeRCC) can help ensure firms avoid falling foul of the regulator in the future.
Yorkshire-based Lawrence Scoffield Mortgages Ltd (LMSL) and West Midlands firm Council Homebuyers Ltd (CHL) each received £10,500 fines, while Manchester-based Mortgage Network Solutions (MNS) was also singled out, for a catalogue of management failings, the FSA announced today.
The action follows a five-month inquiry last year into the quality of advice on offer at hundreds of mortgage firms across the UK.
But Mark Roberts, head of financial regulation at the ifs School of Finance, says such action can and should be avoided.
“The FSA fines imposed on two mortgage brokers, and the censuring of another, again demonstrate the constant need for mortgage brokers to treat customers fairly at all times,” he says.
“Our CeRCC qualification can help achieve this. It formally assesses knowledge and understanding of the principles and practice of TCF as well as providing evidence of the action taken to embed TCF at all levels in an organisation.
“The CeRCC qualification can help in addressing the need to show the FSA how the firm is responding to this vital issue and addresses the key features of the FSA approach to TCF.”
The FSA announced the fines handed out to LMSL and CHL, as well as the action taken against MNS, earlier today.
The firms were among 65 mortgage brokers visited between June and October 2006 as part of the quality of advice process thematic project.
In all, the project reviewed 252 firms of various sizes through mystery shopping, questionnaires and visits to establish a baseline on the way advice is delivered in the mortgage industry.
The review found there was scope for improvement among firms in all aspects of the advice process.
Jonathan Phelan, head of retail enforcement at the FSA, says: “It is essential that firms implement and maintain robust processes to ensure they recommend suitable mortgage contracts and treat their customers fairly.
“Poor processes of the kind we identified in these mortgage brokers meant there was a risk of unsuitable mortgage contracts being recommended, either because the advisers were not appropriately qualified and supervised or because the assessments of the customers’ needs and circumstances were incomplete or poorly documented.”
The FSA says both LSML and CHL failed to exercise adequate management and control over their sales processes and MNS failed to make and retain proper records relating to its customers' needs and circumstances and to keep adequate records of its Training and Competence procedures.
It has instructed LSML, CHL and MNS to carry out a past business review. All three firms agreed to settle at an early stage of the FSA's investigations. LSML and CHL qualified for a 30% discount under the FSA's executive settlement scheme. Were it not for this discount the FSA says it would have imposed a financial penalty of £15,000.
If you would like to comment on this story, contact:
020 7034 2636
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till