21 Sep 2015
Client Briefing: Compliance, Conduct and Risk Bulletin September 2015
1. What does the Mortgage Market Review (MMR) mean for lenders
Lenders are fully responsible for assessing whether the customer can afford the loan, and they have to verify the customer's income. They can still choose to use intermediaries in this process, but lenders remain responsible.
Lenders are still allowed to grant interest-only loans, but only where there is a credible strategy for repaying the capital.
There are transitional provisions in the MMR that allow lenders to provide a new mortgage or deal to customers with existing loans who may not meet the new MMR requirements for the loan. The borrowing can not exceed the amount of their current loan, unless funding is required for essential repairs. The decision on whether or not to lend in these cases remains with the lender.
Find out more: Mortgage Market Review
2. Legal & General to raise awareness about Mortgage Credit Directive (MCD) with new tool
The financial services company, Legal & General, has launched its new Mortgage Credit Directive Guide and Mortgage Credit Directive Matrix. The guide gives brokers an overview of what the MCD means to them, whilst the matrix aims to raise awareness of the MCD regulation, and to help advisers keep track of regulatory announcements ahead of the new rules coming in to force on the 21st March 2016.
Although the final deadline is in March, firms can elect to adopt a majority of the regulation from the 21st September 2015. Legal & General’s MCD Guide and Matrix will include details on when lenders are planning to adopt the new MCD rules, as well as information on what the rules are and which products they apply to.
Find out more: Mortgage Finance Gazette
3. Citizens Advice: A million at risk of repossession
New research from Citizens Advice has shown that almost 1 million people are at risk of having their homes repossessed because they have no way of paying off their interest-only mortgage.
The research shows that 934,000 people who have interest only mortgages have no plan to pay it off when the term ends. This means many people would have to sell their homes or get into further debt, and may risk having their homes repossessed.
Many people who spoke to Citizens Advice about their interest only mortgages claim that they were not made aware that they would need to pay capital at the end of their term. The average amount owed is estimated at £71,000.
The regulations around interest only mortgages changed in 2012, and were not available without a viable repayment plan. Citizens Advice believes the people who were sold an interest only mortgage before the new regulations need more support.
The FCA has called on lenders to contact borrowers with interest only mortgages and advise them on repayment plans. Only 30% of lenders have so far responded to this request.
Find out more: Home repossession advice
4. FCA publishes final rules on Complaints handling
In summary the changes will:
- Extend the 'next business day rule', where firms can handle complaints less formally without sending a final response letter, to the close of three business days.
- Require firms to report all complaints.
- Raise consumer awareness of the ombudsman service, by requiring firms to send a 'summary resolution communication'.
- Prevent firms from charging existing customers premium telephone rates.
Find out more: Improving complaints handling, feedback on CP14/30 and final rules
5. FCA and HM Treasury launch the Financial Advice Market Review (FAMR)
The review will examine how financial advice could work better for consumers.
Find out more: Statement on the Financial Advice Market Review
6. FCA’s Thematic Review into early arrears management in unsecured lending
The FCA’s thematic review into early arrears management in unsecured lending will focus on the early stages of the collections process, including how customers are treated by lenders when they first experience arrears and payment difficulties.
Find out more: Early arrears management in unsecured lending
7. FCA’s Thematic Review on unauthorised transactions
The FCA’s thematic review into unauthorised transactions has found that firms generally are making good efforts to reach fair judgments when handling claims for unauthorised transactions.
The FCA has stated that they expect firms to review their report to ensure they fully understand the legal and regulatory responsibilities for dealing with unauthorised transactions and to amend their approach where necessary.
The FCA has commissioned independent consumer research the results of which may interest firms.
Find out more: Review of fair treatment for consumers who suffer unauthorised transactions