The Financial Conduct Authority (FCA) has published advice for consumers over self-certified mortgages from firms not based in the UK.
This follows widespread coverage in the consumer press about a firm outside the UK relying on the European Electronic Commerce Directive (ECD) to provide mortgages to customers in the UK without the protections offered by the UK’s mortgage regime.
Self-cert is no longer permitted in the UK and firms must check a customer can afford a mortgage, including verifying their income in every case. From 21 March 2016, all firms offering mortgages in the UK (including EEA firms) will have to comply with the Mortgage Credit Directive (MCD), which requires a thorough affordability assessment based on information that has been verified by the lender.
The FCA said: “If you take out a mortgage offered from outside the UK under the ECD, you will lose important UK consumer protection benefits, such as the right to refer complaints to the UK’s Financial Ombudsman Service and to be treated fairly when facing payment difficulties.
“Under the ECD, firms can only contact customers on-line, not by telephone or post. This means you will not be able to speak to the firm about your mortgage arrangements.
“Firms providing on-line services from an establishment in an EEA State other than the UK under the ECD have to comply with the law of that state, rather than with UK regulatory law. If anything goes wrong, the responsibility is with the other EEA State’s authorities.
“Even if a regulated mortgage adviser in the UK recommends such a mortgage, you will not be able to get compensation from that adviser if it turns out you cannot afford the mortgage payments. This is because the adviser is not responsible for assessing affordability.”