27 Apr 2016
Client Briefing: Compliance, Conduct and Risk Bulletin April 2016
1. FCA waivers affordability rules on hybrid lifetime mortgages
The FCA has allowed lifetime mortgage lenders to waiver rules that will allow them to "switch off" affordability assessment for customers offering interest-charging lifetime mortgages that can convert to roll-up mortgages.
The FCA has said: “We have decided to make this modification available because we do not consider that an affordability assessment is required where there is no risk of arrears and repossession in the event of missed payments."
The modification works by dis-applying the requirement to carry out an affordability assessment where interest payments are anticipated or required, providing that the specific lifetime mortgage allows the consumer to exercise at any time an option to convert the product to interest roll-up. The modification applies to lifetime mortgage providers and intermediaries. Intermediaries can rely on the provider’s modification when arranging or advising on that provider’s lifetime mortgages.
Paul Smee, CML director general, said: "This may look like a small change, but it is a really significant one that should allow the lifetime mortgage market to develop in a far more sensible and consumer-friendly way. It removes one barrier to the provision of sensible, safe and worthwhile lifetime mortgage products."
Find out more: Mortgage Finance Gazette
2. FCA consults on fees and levies proposal
The FCA has released a consultation paper on their regulated fees and levies proposals for 2016/17.
All fee-payers will be affected by the consultation paper. Although it does not contain material directly relevant to retail financial services consumers or consumers groups, fees will indirectly be met by financial services consumers.
Responses are required by 27th May 2016 by using the online response form at: http://www.fca.org.uk/news/cp16-9-fees-levies-2016-17
3. Prudential Regulation Authority proposes affordability tests for buy-to-let mortgages in England and Wales
As the stamp duty surcharge kicks in for buy-to-let purchases in England and Wales, the Prudential Regulation Authority have proposed that affordability tests are introduced to implement minimum standards for lenders who are under-writing buy-to-let mortgage contracts.
The proposals seek to ensure that firms conduct their buy-to-let business in a prudent manner. They aim to prevent a marked loosening in buy-to-let underwriting standards and to curtail inappropriate lending and the potential for excessive credit losses.
The consultation paper proposes:
- A set of expectations for firms that underwrite UK buy-to-let mortgage contracts where the land is intended to be occupied as a dwelling on the basis of a rental agreement, in pounds sterling, regardless of whether the borrower is an individual or limited company; and
- A clarification in relation to application of the SME supporting factor on buy-to-let mortgages.
Find out more: Bank Of England
4. FCA publishes Quarterly Consultation Paper No.2 of 2016
The FCA has published their second consultation paper of 2016, proposing minor changes to the FCA handbook.
The proposed changes include:
- Changes to the Glossary, SUP, MCOB and MIPRU to signpost how rules implementing the Mortgage Credit Directive apply to passporting firms;
- Changes to the Listing Rules, the Disclosure Rules and Transparency Rules, the Prospectus Rules and the Glossary;
- Making changes to the Enforcement Guide to address the situation where a Final Notice is issued following the prior publication of a Warning Notice Statement;
- Changes to the regulatory reporting requirements set out in the Supervision
manual. The proposals amend the notes for the completion of Product Sales Data, conduct breach reporting, credit union prudential reporting requirements, annual reports and accounts reporting, consumer credit forms, non-EEA subgroup reporting and MLAR notes; - Amending the Enforcement Guide and the Decision Procedure and Penalties manual to reflect the FCA powers over UK ELTIFs and to set out a decision making procedure.
Find out more: Quarterly Consultation Paper No. 12
5. FCA Publish Business Plan for 2016/17
The FCA published their business plan for 2016/17 on the 5th April 2016.
Their priorities for the coming year will be:
- Pensions;
- Financial Crime and Anti-money Laundering;
- Wholesale financial markets;
- Advice;
- Innovation and Technology;
- Firms’ culture and governance; and
- Treatment of existing customers.