The implementation of the Mortgage Credit Directive (MCD) and the introduction of FCA regulation will be a “big event” for the second charge market, the regulator told an audience at the Financial Services Expo (FSE) London on Wednesday (September).
Keith Hale, technical mortgage specialist at the FCA, acknowledged that the move to FCA regulation was a “big change” for all second charge practitioners.
The MCD will be implemented from 21 March next year, however firms are able to start adopting the rules from next week. Hale acknowledged this meant firms would have to be clued up about when lenders, for instance, were likely to be changing and how this would affect key issues such as product disclosure. “Lenders need to be communicating if they are going early,” he said.
One of a number of changes affecting both first and second charge activities is the introduction of the ESIS document replacing the KFI. However, while second charge practitioners will have to use the ESIS from implementation, those undertaking first charge activity can use a KFI with top-up information until 21 March 2019.
“This means products could be displayed differently in different documents to consumers for up to three years,” he said. “Advisers will need to be comfortable with both forms of documentation and how they take customers through them.”
Hale also urged second charge advisers who had currently not begun the authorisation process to start immediately. “Please start thinking about authorisation,” he urged. “For those who haven’t – shame on you. The clock is ticking.”
There was also a suggestion that those advisers who choose only to offer second charge loans post-MCD may well want to think about offering a fuller ‘secured loan’ – firsts and seconds – advice proposition. “If you’ve only been offering seconds, then do you need to be thinking about offering first charge advice too?” he said. “There seems to be a business opportunity available for those who can provide a more holistic answer. Consumers who are introduced away…makes for a disjointed transaction. Smart people will be able to spot a chance here.”