FSA 'sees lenders as drug dealers'

Friday, 13 November 2009 12:00

The Financial Services Authority (FSA) sees lenders as "drug-dealers at the school gates", according to the chairman of the Council of Mortgage Lenders (CML).

The regulator's attitude to consumers and the industry will not help either side, CML chairman Matthew Wyles told mortgage industry delegates in a speech.

"I have a sneaking suspicion that it's the way that regulators see consumers - as wanton children who have a tendency to want what isn't necessarily good for them, and for whom Nanny knows best.

"Increasingly, I also have the feeling that regulators see lenders and intermediaries as the sweetshop owners - or worse, the drug-dealers at the school gates - of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes," he said.

The FSA has proposed tough new rules for the mortgage market, including banning self-cert loans, and requiring stringent affordability tests.

But the regulator also said it needed to change its view of the relationship between banks and consumers: "Our policy approach to date has been underpinned by a view that mortgage consumers will act rationally to protect their own interests," the FSA said in its recent report into the mortgage market.

"We believe that we need to change that approach, recognise the behavioural biases of consumers and be more interventionist to help protect consumers from themselves."

Lenders are concerned this will mean more expensive products, less innovation and ultimately fewer people able to buy their own home.

Mr Wyles said: "We must learn from the excesses of the past, but guard against the temptation to throw a suffocating blanket of excessive regulation over lenders and consumers alike to the detriment of all."

Speaking at the same conference, the FSA's managing director of supervision, Jon Pain, said: "Everyone who takes out a mortgage should be able to repay it - they should have some evidence that they can repay it and lenders should take note of that evidence.

"We want lenders to get back to the basics of responsible lending and we will continue to push the industry where we find firms are not treating their customers fairly."

The FSA is currently consulting with the mortgage sector on the proposed new rules.

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