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22 | Treating customers fairly
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Joanne Smith, chief executive & creative officer at
The Consulting Consortium, looks at the impact of
regulation on TCF in 2010
efore looking too far forward it importance of intensive supervision focused on In the speech Pain concluded: "Just as a house
is often beneficial to look back outcomes, and its commitment to restore requires solid foundations to be long lasting,
and reflect on situations and confidence in financial markets, to protect mortgages need to be based on a proper
circumstances we have consumers and reduce financial crime. assessment of affordability if we are to have a
encountered and managed to He also sought to address some of the issues sustainable market. Everyone who takes out a
overcome. raised by the industry following the publication mortgage should be able to repay it - they should
of the mortgage market review. Outlining the have some evidence that they can repay it and
When looking at regulatory implications it is rationale for the review, the key points lenders should take note of that evidence. We
fair to say that some firms have been guilty of emphasised were: want lenders to get back to the basics of
not fully realising the watchdog’s intentions or lThe FSA is not seeking to block access to the responsible lending and we will continue to push
seriousness and the high regard in which it market through income verification measures; the industry where we find firms are not treating
holds its principles. The title of one of these sets rather, it expects these to yield various benefits, their customers fairly."
of principles ‘Treating Customers Fairly’ was one including a reduction in the number of
that was, initially at least, easily mocked and unaffordable and unsuitable mortgage Back to basics
sometimes taken in a lighter spirit than it should transactions; a decrease in arrears and Getting back to basics it is important to re-iterate
have been. However, a good few years down the repossession rates; improved transparency; a just what the regulator means by TCF. All firms
line the FSA appears as intent as ever on reduction in mortgage fraud; and an improved regulated by the FSA have to support the FSA
ensuring that these principles are at the bedrock confidence in, and therefore sustainability of, Handbook’s principle that a firm ‘must pay due
of all firms operating within the financial the market more generally; regard to the interests of its customers and treat
services market. lThe FSA will work closely with firms to them fairly’. The TCF principle aims to raise
The regulator has continually worked to identify acceptable verification measures and standards in the way firms carry on their
underline the importance of this initiative and best practice for affordability assessments; business by introducing changes that will benefit
there is no getting away from this underlying lAffordability checks will not look to judge how consumers and increase their confidence in the
belief. Evident in the recent mortgage market individuals spend their money but it is financial services industry.
review was the fact that the FSA wants lenders to essential for lenders to do an appropriate and Specifically TCF aims to:
get back to the basics of responsible lending and proper assessment of a borrower's genuine lhelp customers fully understand the features,
it will continue to push the industry where it ability to repay; benefits, risks and costs of the financial
finds firms are not treating their customers l It is not the FSA's intention to penalise 'non- products they buy
fairly. banks' or to stifle competition but is looking to lminimise the sale of unsuitable products by
curb the particularly high-risk lending encouraging best practice before, during and
Bold approach strategies that led to significantly higher after a sale
Speaking at the recent Council of Mortgage mortgage arrears levels; and
Lenders' Annual Conference, Jon Pain, the l The issue of arrears need urgent attention and Desired consumer outcomes of
Financial Services Authority's (FSA) managing to this end, the FSA will consult in January TCF
director of Supervision, emphasised the FSA's 2010 on tightening its conduct of business The FSA has outlined six core consumer
new bolder approach to regulation, the rules on arrears handling. outcomes that it wishes to see as a result of the
January 2010  Mortgage Introducer
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