The Financial Conduct Authority (FCA) will conduct a review of good and bad practice at mortgage broker firms.
In a letter, the regulator said that, as part of the review, it would select a “cross section of firms” and would look to “publish good and poor practice” so that mortgage broker companies can “learn from the work that has been carried out”.
The review will look at whether “sufficient assessment of customer circumstances is being carried out, and whether the advice given is suitable”.
“We will assess the extent to which firms are ensuring customers understand the products available to them. We will also review the adequacy of firms’ systems and controls, and quality assurance procedures to ensure there is consistency in the advice given and appropriate oversight to mitigate risks of harm,” the letter said.
The FCA added that it planned to assess how mortgage broker firms are identifying and managing conflicts of interest.
The regulator added that where it identified the “risk of high-pressure sales is not being properly managed”, it would consider “appropriate regulatory tools” to ensure proper management.
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On excessive fees and fair value, the FCA said certain products or customer circumstances can make the “advice process longer or more complicated” and lead to higher fees, but it would not expect firms to up prices “unfairly or without justification”.
The regulator said it had seen “different approaches” in terms of fair value assessments, and there were some “positive steps” that had been made, with companies conducting holistic reviews of fees compared to costs and services provided.
There have also been examples of firms having reduced or removed charges for certain products or services, putting better controls in place for certain customer groups and removing charges if they do not offer fair value.
“However, we have seen instances of less considered approaches, and we remind firms that solely benchmarking against competitors does not go far enough. We have recently published an update on good and poor practice in fair value assessments, so that firms can understand what good and poor practice looks like under the Consumer Duty.
“We expect firms to be able to demonstrate their products and services offer fair value, and we will continue to monitor this as part of our ongoing supervisory work,” the letter said.
The FCA added that it would “continue to closely monitor firms’ compliance with our financial promotion rules”.
Other priorities that the FCA noted include dormant appointed representatives (ARs), managing conflicts of interest in ARs, trading names being used as an alternative to authorisation and being appointed as an AR improperly and conditional selling.
