The Association of Mortgage Intermediaries (Ami) has published a factsheet providing information about financial promotions for sub-prime mortgages.
The factsheet has been designed to give an overview of common errors on sub-prime promotions and how they can be addressed to help create compliant financial promotions.
Earlier this month the FSA published a progress update on its financial promotions work. The report also included information on the future direction of the regulator’s work, outlining a number of key areas it would focus on. One of these was the financial promotions produced by mortgage intermediaries, in particular sub-prime promotions from small broker firms.
Ami says its factsheet aims to cover the FSA’s specific financial promotions requirements and to outline the common errors the regulator has uncovered in sub-prime promotions.
Such errors include omitting or not using a correctly calculated annual percentage rate (APR) plus the APR not being prominent enough. Promotional material has also failed to contain risk warnings or contained risk warnings which were inaccurate or not prominent enough. Other errors include missing or incorrect fee disclosure information; and a lack of balance – promotions listing the benefits but not the potential downsides.
The factsheet provides information on:
Also included are examples of compliant sub-prime promotions and a list of areas to consider around the approval process and the use of management information in formulating promotions.
An MCOB 3 ‘Road Map’ is also included – this is a high-level reference list detailing the area intermediaries should refer to when looking for specific rules and guidance.
Rob Griffiths, associate director of Ami, says the FSA’s progress update stressed the need for improvement from mortgage intermediary firms in the standard of their financial promotions, particularly in the sub-prime sector.
He says the update singled out sub-prime financial promotions as potentially targeting more vulnerable customers and therefore felt it needed to focus specifically in this area, especially on those promotions produced by smaller broker firms. AMI has therefore decided to produce this factsheet to help members with their compliance responsibilities.
“The regulator has issued a warning that it will not just focus on repeat offenders but those firms who have failed to grasp, or show awareness, of the rules. Any firm unsure of the specific sub-prime financial promotions rules should use the factsheet, in conjunction with the rules and guidance, to ensure their promotions are fully compliant and ‘clear, fair and not misleading. The FSA has historically adopted an educational stance in this area but the threat of enforcement action is there for those firms who continue to flout the rules." he adds.AMI’s sub-prime financial promotions factsheet is available to all members from the AMI website.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].
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