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MORTGAGES : WHO DOES WHAT
The Treasury has overall responsibility for the regulation of financial
services of all kinds. As mortgage loans may be covered under various
legislative provisions, a number of Government Departments have roles:
HM Treasury
Responsible for financial services regulation policy and whether
the advice and selling of mortgages should be subject to regulation
by the Financial Services Authority (FSA).
FSA
The FSA will be the statutory regulator for the new proposals on mortgage
marketing; already regulates the selling of endowment policies as
part of its regulation of investment business. The Financial
Services Ombudsman will deal with complaints relating to the sale
of mortgages under statutory provisions replacing the current Banking
and Building Society Ombudsmen.
DTI
Overall responsibility for consumer affairs policy, including secured
and unsecured loans under the Consumer Credit Act (including mortgage
loans up to £25,000), including the standardisation the calculation
and disclosure of annual percentage rates (APRs).
OFT
Responsible for national trading standards, as well as the policy
on consumer credit licences; policing consumer contracts; and enforcing
the Unfair Terms in Consumer Contracts regulations.
DETR
Overall responsibility for housing policy, including the house sales
process.
TIMETABLE OF MORTGAGE MEASURES
July 1997 CML Code introduced for lenders
April 1998 CML Code introduced for brokers
The Council of Mortgage Lenders voluntary code of practice for
lenders and brokers. This sets minimum standards of good mortgage
lending practice which lenders and intermediaries have to meet.
2 February 1999 Treasury Select Committee report
Third report from the Treasury Committee, 1998-99 (HC 73) - Financial
Services Regulation, said:
'We remain concerned that mortgages, often the biggest single
transaction an individual makes, are proposed to remain outside the
scope of financial services regulation. We expect to see clear and
detailed justification for any decision by the Treasury to continue
the voluntary regime for the regulation of mortgages beyond the review
due later this year.'
27 April 1999 Burns Committee
Joint Scrutiny Committee on the Financial Services and Markets Bill
(the Burns Committee) (HL 50/HC 328), recommended :
'A decision be taken in principle now to bring mortgage advice
within the remit of the FSA.'
20 July 1999 Treasury discussion document
HM Treasury published "Regulation of Mortgages: a discussion document
by HM Treasury", launching open public debate on whether and how
FSA regulation could best protect consumers. Responses were required
by 22 October 1999. About 200 representations were received.
29 September 1999 Consumers Association powers
DTI announce granting powers to the Consumers' Association to bring
legal action on behalf of consumers under the Unfair Contract Terms
Act against those who use terms in their standard contracts which
mislead of confuse consumers. These came into effect in October 1999.
13 October 1999 CAT standards consultation document
The Treasury published for public consultation proposals for voluntary
CAT standard mortgages, covering charges, access and terms. The proposals
covered two CAT standards: for variable interest rate mortgages, and
for fixed or capped interest rate mortgages. Responses were requested
by 17 November.
18 October 1999 Treasury mortgage seminar
FSA regulation cost benefit analysis
The Treasury organised a seminar on mortgages, open to the industry,
the public and consumer representatives. At the seminar, the FSA published
the results of its cost benefit analysis of mortgage regulation. This
found, depending on the level of regulation adopted, that the additional
cost of regulation consulted on by the Treasury would cost borrowers
about 15 pence per month on a £60,000 mortgage (about 0.015%).
This would be offset by the benefits of enhanced competition and reduced
scope for individual consumer detriment.
29 October 1999 First mortgage 'summit'
DTI Secretary Stephen Byers and Treasury Financial Secretary Stephen
Timms meet leading mortgage lenders, FSA, OFT, Ombudsmen and consumer
bodies to consider how to improve mortgage information and tackle
problems consumers experience with mortgages
26 November 1999 Improving APRs
DTI laid regulations providing: standard method for calculating APR;
cost of compulsory payment protection insurance to be included in
APR; and for APRs to reflect the total cost of a low start mortgage
loan over its entire life. To come into force in April 2000.
17 December 1999 Banning Tie-Ins
DTI announce proposals to ban the practice of bundling, to be included
in forthcoming DTI consumer legislation.
21 December 1999 FSA endowment policy review
The FSA announced its conclusion that there is not sufficient evidence
of generalised significant disadvantage to endowment mortgage holders
to warrant full review and reopening of past transactions.
The FSA made it clear that it was concerned about evidence of poor
standards in selling practices and warned the industry that the regulator
will take a tough line with any firms found not to be complying with
new guidance. The FSA will track the sale of endowment products and
seek detailed explanations for sales growth which might suggest concerted
commission driven selling when these products are generally declining
in popularity.
The FSA also issued clear advice to borrowers concerned about their
endowment policies, in particular not to risk significant loss by
surrendering endowment policies early without taking advice.
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