Two thirds of U.K. mortgage advisers may be breaking rules meant to ensure customers aren't misled into taking out inappropriate loans, the U.K.'s market regulator said.
Just one third of the 252 firms targeted had suitable processes in place to ensure customers received correct advice, the Financial Services Authority said today in a report. Failings were found ``in all aspects'' of the process, the agency said in a statement today.
Buyers in Britain's $7 trillion housing market have shrugged off two rate increases by the Bank of England since August that brought borrowing costs to a five-year high of 5 percent. Homeowners are taking advantage of rising prices to borrow ever- increasing amounts against their homes.
``It is crucial that customer needs are assessed properly,'' Clive Briault, managing director of retail markets at the FSA, said in the statement. ``It is essential that firms have robust processes in place, so that they treat their customers fairly and provide suitable advice.''
The FSA carried out a survey between June and October last year. Some firms were sent questionnaires, the regulator sent ``mystery shoppers'' to others.
Banks and building societies had the most robust systems in place, although proper procedures weren't always followed, the report said. Smaller companies fared the worst, with more than three quarters of them found to be at fault.
``Whilst mortgage intermediary firms are responsible for meeting the rules, the regulator also has a role to play in helping firms to understand how to fulfill their regulatory responsibilities, and in doing so, providing an effective regulatory regime for consumers,'' Rob Griffiths, associate director at trade body the Association of Mortgage Intermediaries, said in an e-mailed statement.
The FSA must make sure it's regulation doesn't impose ``disproportionate costs'' on advisers, he said.
Companies that don't improve their performance may be fined by the regulator. Since April the FSA has levied more than 1.5 million pounds ($2.9 million) worth of fines on companies that have offered flawed financial advice to consumers.
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