The Association of Mortgage Intermediaries has raised concerns over whether online decision trees from so-called robo-advisers constitute regulated advice ahead of the Open Banking directive coming into force in January next year.
Open Banking will see data shared through the UK’s eight largest banks and Nationwide through an open programming interface (API) with third parties – and AMI suggested it makes the question of whether online comparison firms are offering fully regulated advice even more pertinent.
The association’s Quarterly Economic Bulletin said: “There are some broker and comparison firms which claim to assess the whole of the market… [through open APIs]; we disagree that they do, and consider that the open banking regulation is likely to make this process much more transparent and accessible for all firms in the market.
“AMI’s concern is how this marries with Mortgage Market Review rules that stipulate the need for financial advice for a large proportion of borrowers, particularly those deemed to be vulnerable.
“Age, mental or physical infirmity as well as emotional and familial considerations cannot necessarily be shared through APIs.
“Additionally, open banking escalates AMI’s already stated concern over whether online decision trees – automated, and then branded advice – can actually constitute fully regulated advice.
“We actively believe that an imprecise understanding of mortgage regulation, market dynamics and the laws of consumer protection under the purview of the Financial Conduct Authority combined with a disproportionately loud public voice is misleading consumers.”
The association also pointed out that some lenders are far more forthcoming than others in making this open interface available to third parties.
It added that financial services technology is likely to move forward at a significant pace after 13 January, which is in time for the European directive.