The Council of Mortgage Lenders has criticised the Financial Services Authority for its lack of clarification over the responsibilities of and relationship between providers and distributors.
In its response to the FSA’s discussion paper on the responsibilities of providers and distributors, the CML argues the paper merely repeats what is already believed to be the current position, rather than clarifying the FSA’s expectations as to the respective roles and responsibilities of providers and distributors.
In particular, the paper refers to “the nature of the relationship between provider and distributor”, but the CML says it does not give any indication as to the FSA’s expectations, if any, of how this should be evidenced.
Some lenders have taken it to imply there should be formal contracts between providers and distributors, but the CML says this would be contrary to current practice.
It adds: “However, in the absence of such contracts, it is not clear that lenders will be able to produce sufficient evidence to satisfy superiors that they have taken the steps described in the paper to assure themselves that intermediaries are in a position to sell their products compliantly, and to the correct target customer group.”
In addition, the CML points out the paper is silent on the advice process and assessment of affordability, and it asks for reassurance that if lenders include their assessment of affordability during the underwriting process this is sufficient and there is no need to second guess how the distributor sold the product.
The sub-prime mortgage illustration of the FSA’s paper states, “the lender should consider…whether this sub-prime product is one where customers would be wise to seek advice”, but the CML says members have expressed concern it is not for lenders to decide whether a product should only be sold with advice where an authorised intermediary is responsible for the sale.
The CML adds: “If a customer of an intermediary wishes to deal on a non-advised basis, should it not be for the intermediary to make a judgment on whether that is ‘wise’?”
Robin Gordon-Walker, a spokesperson for the FSA, says: "We welcome the input from the CML as an important contribution to the discussion. The views will be taken along with all the other responses we have received."
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 Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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