FSA Finds Mortgage Firms Non-compliant
'Mystery Shopping' exercise reveals 55% of mortgage companies not fully compliant with regulations
12th August 2005
A 'mystery shopping' exercise in the mortgage industry commissioned by the Financial Services Authority (FSA) earlier this year has resulted in 'disappointing' findings, with over half of mortgage firms failing to provide key documents correctly.
The mortgage industry came under FSA regulation late last year, and the regulation requires that two documents must be provided to the customer, giving details of the costs, features and risks of the mortgage proposal. These documents are known as the Initial Disclosure Document (IDD) and the Key Facts Illustration (KFI).
In the undercover shopping exercise, 82 mortgage lenders and brokers were approached by the FSA under the guise of a consumer wanting to arrange a mortgage.
Of these firms, 55% failed to correctly supply the documents:
- 28% failed to provide one of either an IDD or a KFI
- 15% failed to provide both
- 12% provided the documents but not at the right time
Clive Briault of the FSA commented:
"These are disappointing findings. The key facts documents are designed to give customers clear, straightforward information on the services and products they are being offered to enable them to make informed decisions and to shop around. It is extremely important for all firms to comply with our regulations...
If we find that some firms continue in these failings we will take this very seriously and the appropriate action will be taken, including enforcement action if necessary."
Read More: FSA mystery shopping finds mortgage firms are not providing key documents
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