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F&I compliance: Lessons for dealers from mortgage lenders

The cultural shift among mortgage lenders is on-going as the industry grapples with new regulations which place customers at the top of the agenda, according to Grant Thornton director for banking and mortgages Tony Moroney.

Moroney will take to the stage at AM’s very first F&I Compliance Conference on tomorrow when he will provide delegates with some of the learnings from the now heavily regulated mortgage lending industry.

Following EU, UK and US reviews into the failures of the mortgage market, 2014 has seen large-scale reform with lenders now having to adhere to strict regulations imposed by both the EU and the UK including the Mortgage Market Review (MMR), which came into force in April this year.

Moroney said: “The new regulatory environment continues to evolve. However, there is one absolute certainty; consumer protection will remain the most important factor.

"Mortgage lenders were quick to adopt a new approach, that provision of advice and the assessment of affordability are non-negotiables and that their sales culture and processes needed to not only embed the MMR requirements but be capable of recreating the basis for their lending decisions at a future point in time. 

“Most of the emphasis has been on new mortgage customers. However, the FCA has flagged that it believes some existing mortgage customers are being disadvantaged during the transition period.

"Equally there is a growing recognition that Conduct Risk (first highlighted by the Financial Services Authority in 2011 ‘the risk that firm behaviour will result in poor outcomes for customers’) goes hand-in-glove with the new regulatory requirements.

"The emphasis therefore must be on 'doing right' by the customer not just at the point of sale but throughout the life of the lender’s relationship with the customer. This has significant cultural implications for lenders.  

“Mortgage lenders recognised very quickly that the provision of advice has significant cost and resource implications for their business.

"For some, the answer was to lean more towards intermediaries to circumvent resources constraints and/or avoid costs. For direct mortgage sales, lenders had to ensure their mortgage advisers were adequately trained and supported. This has led to other dilemmas such as how best to allocate scarce mortgage advisor capability, the role of technology and of course, the sales process itself.

“As with all new regulations, there are teething problems and as a consequence, the customer experience has suffered.
"Apart from the widely reported confusion over affordability, the length of time required to both get an appointment and go through the mortgage interview process has increased. Undoubtedly more work is needed across the sector on the mortgage customer journey.”

He added: “Compliance with regulations is mandatory, but so too is the lender’s obligation to treat customers fairly, be transparent and be customer centric.

"Lenders must ensure they understand the affordability and suitability of loans, and therefore need robust sales processes, controls and feedback mechanisms. These issues will not be left to chance and already a post implementation thematic review of MMR is underway. Getting ahead of the regulatory and conduct agenda are key success factors in both industries.

“Taking on financial commitments is significant for most customers. The FCA is concerned with total consumer indebtedness and the fair treatment of customers. Regulation is therefore here to stay. Participating lenders in both sectors must be confident that their advice strategy is delivering the right outcomes for consumers and that they have the right quality assurance process in place.

“In time, lenders will be expected to move beyond prescriptive compliance with regulatory rules and strive to deliver best practice and good customer outcomes.”

A limited number of tickets are still available, to book, please contact Emma-Louise Kinnaird on 01733 395133 or email or visit 

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