Mortgage regulation

From 31 October 2004 all mortgage lenders have to be authorised by the FSA, with specific permission to lend on mortgages. The FSA regulates mortgage advertising and requires all mortgage lending activity to include specific disclosure of the main features of the loan. The statutory regulation of mortgages by the Financial Services Authority (FSA) gives borrowers better information about mortgages, improves consumer protection, and should mean an end to:

loans that cannot be compared easily
loans too expensive to escape
misleading interest rate offers
hidden charges
hard selling of endowment mortgages
expensive tied insurance

Customers are now able to redress complaints through the Financial Ombudsmen Service (FOS), and have further protection from the Financial Services Compensation Scheme (FSCS). The FOS and the FSCS are independent bodies set up under the Financial Services and Markets Act 2000 (FSMA) and became operational on 1 December 2001, when FSMA came into force.

The FOS replaced eight former voluntary and statutory resolution schemes and provides consumers with a free, independent and impartial service for resolving disputes with financial firms. Whilst the Ombudsman’s decision is binding on a company, if the individual is not content with the decision, the option of going through the courts is still available. The FSCS is funded by compulsory levies on authorised firms and the service it provides is also free to customers. They can pay compensation if a firm is unable, or likely to be unable, to pay claims against it.

Home Reversions

The Government’s Pensions’ Green Paper stated that the Government would be ‘looking at options to create a level playing field for the regulation of equity release and home reversion plans to protect consumers and make the market work better.’ An open consultation on whether home reversion equity release plans should be regulated by the Financial Services Authority (FSA) was launched on 11 November 2003. On the back of this consultation, the Financial Secretary announced that home reversion plans will be regulated by the FSA. A further document subsequently consulted on the parameters surrounding the definition of a Home Reversion plan. The response document was published on 16 December 2004.

Legislation to bring Home Reversion schemes into the scope of FSA regulation will be brought forward as soon as Parliamentary time allows.

Mortgages index