As there is a higher risk of consumer detriment arising from a firm’s inability to meet awards made under the Mortgage Code’s customer complaints and redress rules if the firm does not have adequate PII cover, the Mortgage Board requires firms to have appropriate cover as a condition of registration. The cancellation of a firm’s registration effectively removes it from the mortgage industry, as under the Code registered lenders undertake to accept introduced business only from MCCB registered intermediary firms.
The Mortgage Board has conducted a large-scale review of its registered firms asking for evidence by way of copy certificates that the required cover is still in force. Additionally, the Board regularly receives information about the PII status of registered firms from other sources, such as through compliance monitoring visits, which it routinely follows up.
Commenting on the issue, Luke March, chief executive of the Mortgage Board, said “When we introduced requirements for PII in 1999 we deregistered over 200 firms for not taking out the required cover. Our recent sampling project and swift response to evidence of breaches shows our effectiveness in eliminating bad practice and removing firms that pose a real risk to consumers.
“As the sole industry regulator during the long transition period remaining ahead of statutory regulation, we will ensure that the consumer continues to be protected by the Mortgage Code’s provisions and that the industry’s standards and reputation continue to be raised.”
To help achieve this objective, the Mortgage Board is extending its checks on PII cover. At the 2003 registration renewal, the Board will require documentary evidence from all intermediary firms that correct PII cover is in place before accepting an application for renewal (previously existing firms were required to warrant that cover remained in place at registration renewal).
In addition, the MCCB has proposed rule changes that will require firms to ensure that the Mortgage Board is noted as an interested party on their PII policy, in order to reduce the likelihood of a firm cancelling its policy without the Board’s knowledge.
