Robert Sinclair: I come at this from a more European view. While I don’t think this will have much of an impact on the UK I can see some states in the EU where this will begin to work. While Ray and I are old and grey so I agree it may not happen in our lifetime, I would think it might happen in my children’s. Matt Smith: From the CML perspective I think we don’t see this directive achieving a single market. As the largest mortgage market in Europe, our aim is to make sure the UK suffers as little harm as possible. This directive is happening so we need to ensure it goes through in a format that works for our own market as best we can. Andrew Montlake: I would doubt the directive will help make the market more efficient. But potentially it could lead to more cross-border competition. Whether that’s necessarily a good thing remains to be seen. But I don’t think that this regulation will go through exactly as envisaged by those who wrote the document.
THe direcTive is noT uP for consulTaTion THougH iT is sTill in drafT form. HoW Will THe uk be Trying To cHange THe conTenT if THaT’s THe case? Jonathan Cornell: We have a large and active mortgage sector in the UK and I think the directive will change on the basis that the Financial Services Authority, CML and AMI are all trying to point out the impracticalities of it. MS: The directive runs in parallel through the European parliament and the European council. While in parliament it goes to a committee which debates the content and can make amendments. It’s likely to be read by the Committee on Economic and Monetary Affairs and be lead by Antolín Sánchez Presedo MEP. They have the power to completely
deconstruct the proposals, rewrite it in any way they wish and make amendments. A retail directive like this can attract on average about 300 amendments during the parliamentary process alone. We’re a long way short of this being the final version of the document. At the same time it will go through the
council process, where the Treasury’s Mark Hoban MP is representing the UK. The council also has to come to an agreement which will again be different from the draft that the commission has put out.
“THEY HAVE THE POWER TO COMPLETELY DECONSTRUCT THE PROPOSALS, REWRITE IT IN ANY WAY THEY WISH AND MAKE AMENDMENTS.”
The council and parliament then come
together to agree a final version with the Commission. It’s not a straightforward process and that’s why lobbying at the parliamentary level is so important for UK trade associations, the FSA and Treasury. We’re a long way from the final version
and to an extent I think that’s why the FSA is playing down its dependency on European regulation because we’re not sure where it’ll end up.
THe official Time frame is To Have THis drafT Passed inTo laW by THe end of THe year – is THaT unrealisTic? MS: The intention is to move this through the parliamentary process by July. This draft is based heavily on other legislation that has already gone through this process so in that sense it’s not controversial. But then you have Presedo saying he wants a broader scope for the regulation so I suspect it could take a lot longer. RS: That’s the issue. It could be done and dusted by October if it gets through the
committee stage quickly. Or it could take years – the Consumer Credit Directive took six to eight years. Either way, I think by September we’ll know if it’ll come this year or take longer. At that point the FSA will either amend the Mortgage Market Review to reflect the directive’s contents or they’ll just carry on with MMR regardless.
THe direcTive aims To address irresPonsible lending and borroWing noT jusT irresPonsible lending like THe mmr. WHaT form Will THis consumer resPonsibiliTy Take? RS: The early versions of this directive had considerably more in them about what consumer responsibility looked like. This has been significantly watered down following pressure from consumer groups over the last few months. I think that’s unfortunate. It’s not in the title of the directive anymore. We’ve ended up with some very high
level statements around the avoidance of fraudulent statements by consumers and very little else. I think that brings us back to a place where the big onus of responsibility sits with intermediaries and lenders. Whilst I can see the logic of it, I don’t think it’s a good balance to ensure consumers fully understand the implications of the transaction they’re entering into. MS: You can see this in article 24 of the directive which refers to the penalty if a consumer knowingly provides false information that skews the creditworthiness assessment. There is no act in the main body of the directive that requires that penalty. The act has been removed but the penalty remains. RS: The onus on the consumer has effectively been removed other than to provide accurate information to the lender and intermediary. Where they fail to provide sufficient information the lender is still required to make statements accepting that this affects its ability to make a lending decision which puts the responsibility back on the lender. I think that’s unhelpful. RB: Any reference to irresponsible
mortgage introducer MAY 2011 39
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