Campaign to clean up bad-credit mortgages

Wednesday, 29 November 2006 12:00

The Financial Services Authority (FSA) has served notice that it is on a mission to clean up the bad credit mortgage market.

Over 200 sub-prime lenders - who target consumers whose credit rating means they are shunned by major banks and building societies - have been told to change misleading advertising in the last year.

"Financial advertising has a massive influence on the decisions people make. So it must be clear, fair and not misleading, leaving people with a balanced picture of the key pros and cons," said Vernon Everitt, FSA retail themes director.

"This is particularly the case in advertisements by mortgage brokers in the sub-prime market, where people are making one of the most important financial decisions of their lives.

"We need to see standards here rising - and fast."

And as well as reviewing adverts, leaflets and other promotional material for the bad-credit mortgage market - the government watchdog has also followed up offenders with visits.

The FSA found that in many cases bad advertising was just the start of the problem, with some people being sold bad-credit mortgages when there was no sign they had a poor credit history.

"We have found that poor advertising is a sign of wider problems in the way mortgage brokers are managed and controlled," Mr Everitt said.

"We will continue to intervene where this might be the case, including taking further formal disciplinary action.

"Firms in this sector should be on notice that this is a priority area for us in assessing whether they are genuinely treating their customers fairly."

And experts are far from surprised the market needs to be cleaned up.

Ray Boulger, of mortgage broker John Charcol, comments: "The sub-prime sector is awash with dubious companies, peddling heavily over-priced mortgages, often with exorbitant fees and excessive early repayment charges, to those people who can least afford to pay them.

"It is also a huge concern that many people are being sold a sub-prime mortgage when they would qualify for a mainstream home loan.

"This highlights, more than ever, the need for consumers to seek reputable, independent advice before deciding on a mortgage."

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