FSA reveals disclosure documentation findings

The results of its latest review revealed::

The large mortgage lenders in the sample, who account for around three-quarters of total mortgage lending in the UK, have made good progress in taking steps to improve the quality of both their Initial Disclosure Documents (IDDs) and Key Facts Illustrations (KFIs) and are on course to meet required standards by this autumn.

The small lenders in the sample produced IDDs of an adequate standard.

However, more than 25% of the KFIs reviewed that were issued by small and medium-sized intermediaries and small lenders still contain material errors relating to fees and charges.

And more than half of the intermediary IDDs reviewed contained five or more errors - although an improvement on the 80% figure in the 2005 review, this is still inadequate.

FSA managing director of retail business Clive Briault, said:

“I welcome the encouraging progress made over the past year in raising the quality of mortgage information provided to customers. Providing consumers with clear and relevant information is a key element in consumer protection because it enables them to make informed decisions and to shop around. But this review and other areas of our work have found that some firms are still not doing enough to meet our disclosure standards. We will continue to press for these standards to be met, by following up shortcomings with individual firms and by working with the industry."

The 2006 review followed a similar exercise conducted last year which identified variable quality and widespread inaccuracies in the mortgage disclosure documents reviewed. The FSA subsequently gave feedback to the Chief Executives of mortgage lenders and published a Factsheet to help intermediaries achieve a better standard of documentation

.

The FSA's work focussed on the breaches it considered to have the greatest potential for consumer detriment. Under the FSA principles a firm is required to pay due regard to the information needs of its customers, and communicate information to them in a way which is clear, fair and not misleading.

The FSA will continue to work with firms to help them remedy remaining identified problems. This will include following up particular concerns with firms and, in addition to the mortgage disclosure templates already on the FSA website, developing website material to include examples of actual errors made to help firms avoid these in future. Also, small mortgage intermediary firms visiting FSA regional roadshows can have their IDD reviewed to help firms identify any key areas of non-compliance and potential confusion for consumers.

The FSA will undertake further work to check that the clarity, content and length of the descriptions of products and features included in KFIs are helping consumers to shop around and make informed decisions