Speaking at the Mortgage Business Expo Manchester, Bill Warren, compliance director at Complete Mortgage & Loan Services Ltd, and Mike Davies, compliance director at Infinity Mortgages Ltd, both outlined the importance of having everything the mystery shopper is looking for to be fully implemented in a firm’s normal compliance culture.
Davies said: “The key is to identify areas that could be targeted by a Financial Services Authority (FSA) mystery shopper. As an adviser or adviser firm you need to be on the ball for every caller/enquiry. The quality of disclosure and advice you would want to give to a mystery shopper is the quality you should extend to all your clients.”
Warren added: “You can’t prepare for something that should be embedded in the business and be standard practice. The FSA will not signal that you are being mystery shopped, your next caller could be a mystery shopper, so be your own and get in first.”
Both compliance experts pointed to the GFK Mortgage Advice Mystery Shop Exercise 2006 which gives detailed feedback of specific areas which were missed by intermediaries. The main points highlighted in the report on advisers who didn’t disclose the information or ask the questions expected by the FSA in a good quality mortgage interview were:
• No oral disclosure of IDD. (58 per cent)
• Do you have any secured loans at present? (59 per cent)
• Is there an early repayment charge on your present mortgage? (40 per cent)
• How will you repay the capital on an interest-only mortgage? (57 per cent)
• Would you prefer to have an initial low monthly payment, perhaps changing after 12 or 24 months? (81 per cent)
Warren concluded: “It is important lessons are learned from the last exercise and that intermediaries look at areas which were highlighted by the FSA and address them appropriately.”
Meanwhile, the FSA has urged all smaller mortgage intermediary firms to engage with its communications and turn this engagement into action.
Mandy Spink, head of mortgages and credit unions at the FSA, said: “Over two years after the start of statutory regulation, we expect small firms to be in the habit of engaging with our communications. We would expect firms to be engaging with our reviews and our thematic reviews and deciding if they need to be changes made to their businesses. Working together we can improve standards across the sector.”
Spink also highlighted the FSA’s work in moving away from its prescriptive rule handbook to a more principles-based regulatory regime.
She commented: “We are focused on the outcomes we want to achieve; we will simplify our handbook and focus on the responsibility of management to meet the responsibilities of those principles.”
Commenting on the FSA’s work on its Treating Customers Fairly (TCF) initiative, Spink said: “TCF itself will remain a high priority for the FSA. We have recently announced a new deadline date of December 2008 for firms to have completed all their TCF work.”
