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FCA must appeal transitional rule loss

Sarah Davidson

May 14, 2015

Jeremy Wood, chief executive of the Dudley building society, said removing the rules was tantamount to allowing lenders to stop treating customers fairly.

He called on the UK regulator to lobby against the move in Europe before the rules come into effect next March.

He said: “The Financial Conduct Authority had carefully put in the transitional rules to ensure existing borrowers would not be at a disadvantage from the new affordability rules when their current deals ran out or they wanted to remortgage, and yet our European lawmakers have seen fit to torpedo this.

“Our much more sophisticated lending market is going to be saddled with a decision which makes no concession to common sense and engenders very real customer detriment. There is now no compulsion on lenders to treat these existing borrowers fairly.”

In early April the FCA published a paper giving lenders more clarity on its final rules on the implementation of the directive, noting a “conflict” between the MCD and its transitional arrangements during consultation.

To comply with European regulation lenders in the UK will be forced to apply full affordability checks on all borrowers wishing to move lenders, creating thousands of mortgage prisoners who are unable to move or remortgage. Borrowers who want to stay with their existing lenders will not be subject to the same affordability restrictions however.

As a result of the conflict, the FCA paper said: “We are withdrawing certain enabling provisions as they are not MCD-compliant.”

Gev Lynott, chief executive of the Mansfield building society, bemoaned the move by the European regulator which he called “illogical”.

But he said: “Unless the FCA can appeal successfully we need to look at ways we can support those clients within the revised regulations.

“Not everyone can be helped but it is incumbent on intermediaries and mortgage lenders to investigate all the options to help reduce the number of borrowers who see themselves as prisoners.”

Chris Bramham, director of mortgages and buy-to-let of Brightstar, said he understood there may be further clarification of these rules coming soon.

But added: “We have a window of ten months before the MCD is introduced to do the best by customers and help them to move onto better rates.

“The question is: will lenders in the UK make this possible before next March? It presents a huge opportunity without massive exposure for a lender. That said, no-one has done it yet and I think they are missing a trick.”

It is understood that there is no opportunity to change the European regulations at this stage although there is a review of all the rules due five years after implementation.


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