Mortgage customers in Britain now have additional protection since we took over responsibility last October for regulating mortgage lending, advice, administration,and arranging. This is a major addition to our remit, with 2.75 million mortgages taken out each year for new house purchases, re-mortgaging or equity release. And as a result we directly supervise 7,500 mortgage firms with an additional 11,500 Appointed Representatives.
One of our early priorities is to enforce the perimeter of the new regime and to take action against brokers undertaking mortgage business without FSA authorisation. Firms doing this are committing a criminal offence. Taking action against them is vital to protecting consumers, who do not have access to statutory redress and compensation if they deal with unauthorised firms. And we cannot check that unauthorised firms are complying with our conduct of business rules, so there is much greater chance of mis-selling or other consumer detriment. Also by cleaning up the industry we are making a level playing field for legitimate authorised firms.
We have set up a Perimeter Team charged with the task of identifying and dealing with unauthorised mortgage brokers. The team has begun a series of regional visits - starting with a pilot in Edinburgh and Glasgow in late January - to investigate firms that we believe may be carrying on mortgage business without being authorised. The selection of firms to be contacted is based on a number of sources, including our database of firms that registered or applied for authorisation but then withdrew, and leads received from the industry and the public.
Our investigations will include contacting and, where appropriate, visiting target firms. The outcomes we are looking for will be:
-- the firm obtains authorisation - often with our help;
-- the firm obtains exemption (for example by becoming an Appointed Representative or where applicable through a Designated Professional Body);
-- the firm stops carrying on mortgage business.
If a firm refuses to co-operate we can take further action such as using our powers to prosecute for a breach of the Financial Services and Markets Act 2000 (FSMA).
We want unauthorised firms to act now to regularise their positions. We are not seeking to put firms out of business, or make business difficult for them. Where breaches of FSMA are inadvertent, or result from genuine misunderstanding, options for the firm will include obtaining proper authorisation (subject of course to its satisfying our normal conditions for authorisation) or exemption.
To be authorised, firms must as a minimum satisfy the 'threshold conditions' set out in FSMA including a requirement to be a 'fit and proper' person. So, to protect consumers, we are unlikely to be able to authorise firms that have wilfully breached FSMA.
We will be publishing the results of its investigations from time to time. Keep an eye out for news as the work of the team unfolds!