Secured Lending

Secured Lending, sometimes referred to as Second Charge Lending is to be regulated by the Financial Services Authority (FSA) rather than The Office of Fair Trading (OFT). The regulation will cover existing second charges, as well as new business. The commencement date of this legislation will be aligned with the changes due to be announced by the FSA in the forthcoming policy statement.

Although we will have to wait until the Policy Statement is issued to know the full extent of the rules, the transfer of regulation will allow the FSA to impose prudential requirements on second charge lenders and the existence of a robust business model. All firms involved in this market must expect to comply with the same stringent conduct of business rules and principles for business that existing regulated firms have to adhere to. This will involve a complete review of their existing processes. The FSA's approach to regulating firms is set to be much more intrusive and many firms will face challenging times ahead if they don't give due consideration to the requirements imposed on FSA regulated firms.

We can guide you through the challenging process of dealing with or becoming authorised by the FSA. We have been through the process for clients many times and understand what needs to be done and how it works. The FSA have now slowed down their response times and are looking in more detail into every application and so putting together a comprehensive application pack is critical.

If you would like help either applying for FSA authorisation or maintaining compliance afterwards please contact us or call now on 0207 956 2926/0844 324 5275 for a no obligation discussion.
 

A Brief History.

In November 2009 HM Treasury consulted on extending the scope of the FSA to include second charge lending. This followed a regular debate, restarted by the Turner Review, which questioned whether more effective regulation of the mortgage market through tighter conduct rules, would require the extension of the FSA's remit to cover these areas. Currently second charges fall under the Consumer Credit Act 1974 and the scrutiny of the OFT. The consultation by HM Treasury followed the FSA's Discussion Paper in October 2009 - Mortgage Market Review (MMR), in which the FSA set out it's proposals and rationale for regulating the second charge market.

This paper (MMR) makes a number of proposals that will bring about a step-change in regulation. It also highlights the close links between first and second charge mortgages. These proposals include a better assessment of affordability and appropriateness, irrespective of whether sale is advised or non-advised. The FSA are due to issue a policy statement shortly which will set out the final rules for mortgage regulation.