Introduction
With the introduction of the Consumer Duty, the Financial Conduct Authority (FCA) has recently outlined its key supervisory focus areas to mortgage intermediaries for the next two years. The FCA expects firms to prioritise consumer well-being and facilitate informed decision-making. This communication should be discussed at the senior management level, with thought given to how these areas are being addressed within existing Consumer Duty frameworks.
Consumer Duty in Mortgage Advice
Mortgage intermediaries bridge the gap between consumers and lenders, often navigating complex financial landscapes. Under Consumer Duty, firms must go beyond merely meeting lender criteria—they must ensure that their advice processes align with customers’ unique needs, financial goals, and risk profiles.
For first charge, second charge, and lifetime mortgages, firms must conduct in-depth assessments of customer circumstances, particularly for vulnerable customers or complex financial situations. This aligns with PRIN 2A (Consumer Duty), which requires firms to prevent foreseeable harm and act in the customer’s best interests.
Addressing Market Challenges and Risks
The FCA has identified several key challenges in the mortgage intermediary sector:
-
- Quality of Advice and Product Suitability – Rising interest rates and economic shifts necessitate a customer-first approach. Firms must avoid causing foreseeable harm as outlined in PRIN 2A.2.
- High-Pressure Selling and Conflicts of Interest – The FCA warns against sales-driven cultures that prioritise commission incentives over customer interests. Firms should regularly review and manage conflicts of interest to prevent mis-selling, as required under PRIN 2A.8.2 G.
- Excessive Fees and Fair Value – Fees must be justifiable and proportionate to the value provided. The FCA reminds firms that simply benchmarking against competitors does not demonstrate fair value. More guidance on fair value assessments is found in MCOB 2.5A (The customer’s best interests).
- Balanced Financial Promotions Transparency – Mortgage promotions must clearly outline risks and benefits, in line with MCOB 3 (Financial Promotions). The FCA also highlights social media compliance and prevention of misleading advertising.
Supervisory Focus and Thematic Reviews
The FCA will conduct ongoing supervisory work, selecting a diverse cross-section of firms for thematic reviews. The goal is to highlight good and poor practices, creating a learning environment to drive industry-wide improvements.
Additionally, the FCA expects firms to:
-
- Monitor and manage dormant Appointed Representatives (ARs).
- Track the type, volume, and source of business conducted by ARs.
- Terminate relationships with ARs that are not conducting their regulated activities, as outlined in SUP 12 (Supervision – Appointed Representatives).
Leading with Responsibility
The FCA remains committed to upholding high standards, ensuring fair treatment of customers, and fostering a competitive and innovative market. Mortgage intermediaries must ensure that Consumer Duty principles are embedded in their operations, driving customer-centric outcomes and regulatory compliance.
How Complyport Can Help
Complyport provides expert regulatory guidance to ensure that mortgage intermediaries meet FCA compliance standards. Our support includes:
-
- Regulatory Guidance: Expert advice on FCA expectations and compliance obligations.
- Ongoing Support: Ensuring continuous compliance as regulations evolve.
- Compliance Documentation: Reviewing and updating policies and procedures, including post-Consumer Duty implementation adjustments.
- Training: Providing staff training on best practices for compliance and regulatory adherence.
- Authorisation Applications: Assisting firms seeking FCA authorisation for mortgage intermediary services.
For expert compliance assistance, contact Complyport today.
Ask ViCA, your Virtual Compliance Assistant. Claim your complimentary 20 queries today! Register here: https://vica.chat
