Gaping hole in FSA’s new rules leaves consumers out in the cold
In an unprecedented move the FSA has given ‘interim authorisation’ to 25 firms* whose applications to trade under the new regulations have either been refused or not yet approved.
While these firms have to follow FSA rules, they are not covered by the Financial Services Compensation Scheme (FSCS). This ultimately means that people who have bought mortgage products from these companies are left with inadequate protection should anything go wrong.
Laurence Baxter, senior policy advisor, Which? said:
“We put the FSA under notice to deliver regulations which would put the public’s mind at rest when it came to making the biggest financial decision of their lives. Unfortunately it looks like the FSA has fallen at the first hurdle.
“People receiving bad advice from companies with only ‘interim authorisation’ and therefore not backed by the FSCS will not be able to claim recourse should these firms cease to trade (e.g. their appeal is rejected) and things subsequently go wrong.
“There are plenty of firms who do have full authorisation. We urge people only to take mortgage advice from fully authorised firms. You can check the FSA’s website to ensure that their mortgage advisor has FULL authorisation under the new rules.”