Steve Adams

Mortgage Intelligence compliance bulletin: Are you making plans for the 2018 General Data Protection Regulation?

Head of Compliance Steve Adams highlights how Mortgage Intelligence are preparing Appointed Representative advisers early for the 2018 General Data Protection Regulation

GDPR (General Data Protection Regulation) is a piece of EU legislation that will replace the existing Data Protection Act. This legislation, regardless of any Brexit negotiations, will come into effect on the 25th May 2018.  Whilst this may seem a long time away, Mortgage Intelligence has already commenced work on this large scale project and we are currently reminding all advisers to start considering their requirements and obligations in regards to the new legislation.

The new legislation applies to Data Controllers and Data Processors and this means that all Appointed Representative firms, their advisers and staff will have increased responsibilities in relation to their customer’s data.

It is important to understand how the law is changing and the impact this will have. The changes are wide-ranging and detailed but it should be noted that many of the fundamental principles already exist under the Data Protection Act. In terms of changes that could impact Appointed Representatives, the following are some of the key ones:

  • New timescales for Subject Access Requests
  • Changes to consent required from customers to take and process their data
  • Rights for individuals to withdraw consent for use of data and to request it is erased
  • Personal data definitions expanded
  • Changes to the rights for children and enhancements to individual’s rights

As a network, we will ensure that the necessary changes that are required under GDPR are made to the sales process. This includes amendments to our point of sale system and looking at how data is held and stored. Advisers will be responsible for how they look after their own data, from hand-written notes from a client meeting, through to complex management systems.

As a very good starting point advisers can visit the Information Commissioner’s Office. Type “GDPR” into the search facility and the Data protection reform information will appear. The “Overview of the GDPR” and also “GDPR: 12 steps to take now” documents are particularly useful.

If you would like to know more about joining our award-winning Mortgage Network and enjoying compliance support as an Appointed Representative, call our Broker Support Team on 0845 130 7446, option 1.

Mortgage Intelligence Compliance Update: Introducer or Intruder?

Head of Compliance, Stephen Adams, discusses what the mortgage and protection adviser industry has learnt following the Carey Pensions court case.

The Royal Court in London heard claims from an investor in late March that a self-invested personal pension (SIPP) provider, Carey Pensions, had colluded with an unregulated introducer to push retirement savers into high-risk unsuitable investments, where they lost as much as £3m. Carey Pensions denied the claims. But The Financial Conduct Authority has reiterated to providers and advisers the weight of regulation is on them when accepting business from unregulated individuals and companies.

A large amount of fraudulent activity comes from business that originated via unregulated introducers. This doesn’t mean everyone trying to introduce mortgage business to your firm is a fraudster. But, it is imperative that all appointed representatives and directly authorised firms pay close attention to individuals approaching them to introduce business.

Some ex-advisers that have either been terminated by the FCA or removed from lender panels are still trying to make money in the mortgage market. They may approach unsuspecting advisers seeking to exploit any weaknesses in their due diligence checks. To protect your business you must make sure that the individuals you deal with don’t put your career at risk. The FCA takes a rigid stance in terms of responsibility:

“The onus is on the authorised firm which accepts business from an introducer to meet its regulatory requirements”.

But, if it is your responsibility and if after your checks you are happy to proceed with an introducer agreement then the relationship should be made professional. An agreement should be drawn up that outlines your relative responsibilities. This should be signed by both parties and is a good way of setting up the business relationship.

Any agreement you make should set out the terms of the arrangement, such as: what product types will be referred, how the client is informed that an introduction has been made, how information is passed to you, how the agreed remuneration will work and how the agreement can be terminated. If your introducer is reluctant to sign such an agreement, you should ask yourself why this is could be. Appointed Representatives of Mortgage Intelligence must use our Introducer Agreement and Introducer Checklist documents.

We believe carrying out in depth, robust checks as part of your standard procedure when taking on introducers will reduce your chances of working with fraudulent clients. However, regardless of how careful you may be you can still be targeted, so be sure to adopt a common sense check. And ultimately, if you don’t feel comfortable do not proceed – it isn’t worth the risk.

If you would like to join our award-winning Mortgage Network as an appointed representative or become a member of our Mortgage Club, contact our Broker Support Team on 0345 130 7446.

Comparison sites under fire

Despite the popularity of using a Price Comparison Website (PCW) to search for General Insurance, experts and the Financial Conduct Authority (FCA) have raised concerns over not just the compliance of the sites, but also their effectiveness in providing the right cover for consumers.

Do comparison sites really save time and money?

Consumers choose a PCW because of its perceived ability to save time and money. But consumer research by the FCA has revealed that obtaining a quote is rarely a quick process. In fact, research found that some comparison sites demanded answers to over 60 questions in order to obtain a Home Insurance quote, with many finding the volume of information and number of variables surrounding General Insurance products confusing and sometimes overwhelming.

Once consumers did reach the results page, not only did they find the options confusing, but there was also a lack of ability to compare like for like policies as well as cost. Often the lowest premiums would take priority, but the cheapest option is rarely providing the ideal cover, leaving the potential for long term consumer detriment.

Do comparison sites Treat Customers Fairly?

On the back of research undertaken in 2014, the FCA have highlighted that “a focus on price could distract from crucial product features and lead consumers to make an inappropriate policy choice that does not suit their needs and requirements”. In fact, PCWs will actively avoid going into the required detail regarding product options, in order to maintain the perception of speed and ease.

Consumers often have preconceived ideas about comparison sites, assuming them to be impartial and all-encompassing. But as the selling point of the sites is to provide a quick and easy way to compare insurance, it can often fly directly in the face of FCA guidelines on Treating Customers Fairly. Unfortunately some consumers currently use the site as a replacement for an adviser, assuming that the product they are guided towards is the best option for their circumstances.

Why is choosing an adviser a better option?

Choosing an adviser over a PCW gives consumers access to expert advice, industry connections and the knowledge that the adviser will find them cover tailored to their needs. To help in the battle against PCWs advisers now have access to tools like Paymentshield’s Premium Flex, which gives you the option to reduce premiums and bring down the cost of the policy. This means you can now deliver the best of both worlds; the perceived benefits of a comparison site, but with the peace of mind that comes from knowing they are offered the best products for their needs.

Mortgage Intelligence Compliance Update: Treasuring Trusts

Head of Compliance Stephen Adams explains when and why advisers should talk to their clients about the benefits of placing a life policy into Trusts.

With so many protection challenges facing advisers today, we know how difficult it can be to find time to discuss every possible element of Life Assurance with your clients. But according to one leading provider, only about 10% of life policies are currently written in Trust, which suggests that in some cases consumers are not aware of the potential benefits.

In some situations a Trust is likely to be neither relevant nor advisable. However, there will be times when the best consumer outcome will point towards a Trust and clients must be aware of all the potential benefits or disadvantages relevant to their circumstances.

When should I talk about Trust to my client?

Essentially it will be down to the adviser to recommend what is in the best interest of the client. However, as a very general rule: Joint life policies are less likely to require Trusts , as are Single Life Policies where the client is married (but note this is dependent on the level of cover and the latest intestacy rules). But with a Single Life Policy where the client is not married, Trusts can play a very important part and should therefore necessitate a conversation with your client about writing their policy into Trust and ensuring the correct distribution of pay-out.

How can clients benefit from putting their policy into Trust?

Avoiding probate: A legal process which confirms an executor’s authority to deal with possessions. This lengthy process currently takes, on average, six weeks and for more complicated cases can be many months. Putting a policy into Trust will avoid this and any even lengthier connotations such as intestacy, which can be a stressful time for your client’s family and loved ones. If a Life Assurance plan is in trust, it is no longer part of the settlor’s estate so therefore probate is not required as the funds are paid directly to the trustees to distribute the funds.

Helping to reduce Inheritance Tax (IHT): By putting a policy into Trust, your client may avoid the policy being absorbed into the deceased’s estate and being liable for Inheritance Tax. The Government raised £3.3 billion in IHT revenue in 2013/2014 and admits that this number would be significantly reduced if more polices were written in Trust. Any assets left to a spouse or registered civil partner, provided they’re UK domiciled, are exempt from inheritance tax. But this can be often down to whether the policy is kept in Trust until its next 10th Anniversary.

A note from the Compliance Team…

It is important to remember that the above is a very general guide and specific thought needs to be given to each individual customer circumstances. Advice can also be sought from legal helpdesks of product providers. If in any doubt, then an adviser must guide the customer to seek legal advice and record this in the Reason Why Letter.

If you would like to join our award-winning Mortgage Network as an appointed representative or become a member of our Mortgage Club, contact our Broker Support Team on 0845 130 7446 opt 1.

Mortgage Intelligence Compliance Update: Stranger Danger

Stephen Adams highlights the risks unregulated introducers pose for appointed representatives and directly authorised firms

A large proportion of fraudulent activity stems from business that was originated via unregulated introducers. This is not to say that everybody looking to introduce mortgage business to your firm is a fraudster. However, it is clearly the case that close attention should be paid by all appointed representative and directly authorised firms to individuals approaching them to introduce business.

At present there are a number of ex-advisers who have either been terminated by the FCA or removed from lender panels but still want to make money in the mortgage market. They are regularly approaching unsuspecting advisers and seeking to exploit any weaknesses in their due diligence checks. To protect your business you need to be sure that the individuals that you deal with are genuine, honest and ultimately do not put your career at risk.

If after completing your checks you are happy to proceed with an introducer agreement then it is strongly recommended that the relationship is put on a professional footing. A simple agreement, signed by both parties, to outline your relative responsibilities and limitations is a good way of setting up the business relationship. Any agreement you make should set out the terms of the arrangement, such as what product types will be referred, how the client is informed that an introduction has been made, how information is passed to you, how the agreed remuneration will work and how the agreement can be terminated. If the introducer is not keen to have an agreement of this type in place then you should certainly ask yourself why this would be.

By carrying out robust checks as part of your standard procedures for taking on introducers we believe that you will reduce the chances of dealing with fraudulent clients. Of course you could undertake all of the above and still be targeted by an individual who wants to commit fraud. Be sure to adopt a common sense check when dealing with introducers and customers. If you don’t feel comfortable with what you are being told then ask more questions, if you are still not comfortable after this then do not proceed. It just isn’t worth the risk to your business.

If you would like to join our award-winning Mortgage Network as an appointed representative or become a member of our Mortgage Club, contact our Broker Support Team on 0845 130 7446 opt 1.

Staying Safe with Social Media

The FCA recognise that social media marketing is an area of your business that will only continue to grow in the coming years. Their newest guidelines on how to use social media for financial promotions reflects their supervisory approach, which allows advisers to stay compliant whilst enjoying the benefits.

Head of Compliance Stephen Adams has a quick guide to the new document, to help you get a better understanding of how to use social media safely:

What are the guidelines?

The FCA have stated that the definition of a financial promotion within social media is: “An invitation or inducement to engage in financial activity.” This is a key definition and one that applies across all communications. The FCA states that “there are requirements to include risk warnings or other statements in promotions for certain products/services. These rules are media-neutral and therefore apply to social media as they would to any other medium.”

The FCA are also keen to highlight that: “The requirements to be fair and not misleading imply balance in how financial products and services are promoted, so that consumers have an appreciation not only of the potential benefits but also of any relevant risks.” This is an important clarification which ensures that the restrictive nature of social media does not excuse firms from displaying the associated financial risks.

The two most important questions to ask before posting are: Is this a financial promotion according to the FCA guidelines? Am I able to display and balance the potential risks within the communication?

What about word and character limits?

The guidelines have been the subject of some debate between the industry and the FCA, with much of the discussion surrounding the limits and brevity of social media posting, potentially making it difficult to fully comply with regulations in just a small piece of content. The FCA has therefore suggested that firms’ use of word-restricted channels should be limited and not used if promoting a complex feature or service. If you do decide to use it, then you still have the responsibility to ensure it contains the minimum amount of information required.

To help with character limits, the FCA have suggested: “It may be possible to signpost a product or service with a link to more comprehensive information, provided that the promotion remains compliant in itself.” In other words, make sure that you are only promoting financially when all the associated risks are displayed on the communication, otherwise it must remain neutral as an advertisement.

What about sharing, liking and forwarding content?

To know when sharing, liking or forwarding a communication is compliant, check whether it originated from a customer or another FCA regulated firm. Although it is always the responsibility of the original communicator to ensure the post is compliant, the FCA does insist that when “a firm re-tweets a customer’s tweet, the firm is responsible as the communicator, even though the firm did not generate the content of the communication”. The FCA also maintains that: “Firms should ensure that their original communication would remain fair, clear and not misleading, even if it ends up in front of a non-intended recipient”.

What about using images?

Using images to promote is very popular on social media, but you still have a responsibility to ensure that your visual communication is not just compliant, but fully responsive on all devices such as phones and tablets.

If images contain a tagline that directly calls the consumer to action, such as “come and see us” or “save money here”, then they must also display the associated risks. If not, then it must remain solely as a visual advertisement.

When should you be careful?

Firms regulated by the FCA must be careful at all times when using Social media. The FCA also reminds firms “of their obligation to have an adequate system in place to sign off digital media communications.” Sign-off of social media communications should always be a person of appropriate competence and seniority.

Please remember, this is only a guide! So be sure to read the full FCA Guidelines to ensure you are up to speed on the latest on how to safely use social media. We also recommend contacting social media specialists Social Advisers through the Broker Zone website.

Mortgage Intelligence Update: How can advisers protect themselves against fraud?

Head of Compliance Steve Adams reveals his highlights of one of our latest MI Online webinars. The event saw Paul Kane, NatWest Corporate Account Manager, explore not just the link between a rising BTL market and the potential for fraud, but what you as an adviser can do to protect yourself

Advisers love our MI Online series, delivering great ideas and useful insights into many areas of the industry. One recent webinar, hosted by NatWest Corporate Account Manager Paul Kane, explored the relationship between a rising BTL market and the potential for fraud. Paul also highlighted exactly what you as an adviser can do to protect yourself. In case you missed it, here are my key highlights from the session:

Potential business means potential fraud

Most of the recent industry debate has been focussed on the future of BTL after the 2016 stamp duty changes and the upcoming changes in tax relief. This is understandable, considering the potential impact and controversy on its benefits.

BTL is also the fastest growing sector, supported by low interest rates and population growth during a shortage of housing that has put increasing demand onto the sector. BTL applications have increased dramatically since 2011, but it is still predominately an amateur sector, with 63% of landlords owning only one property, despite what some media outlets suggest.

But it is exactly this increase in business levels and public focus that both distracts from potential fraud and attracts certain dangers, which is why ensuring that a strong fraud focus is maintained within the industry has never been more important. Potential business can often mean potential for fraudsters as well.

How does fraud tie in to the BTL sector?

It is important to know some key BTL fraud definitions beyond the broad meanings of Mortgage Fraud and Money Laundering. Mortgage Fraud is defined as “a crime in which the intent is to materially misrepresent of omit information on a mortgage application to obtain a (larger) loan than would have otherwise been obtained had the lender or borrower known the truth.” This can be split further into two categories: Fraud for property and Fraud for profit.

Differences in criteria means that BTL fraud is typically classed as Fraud for Property rather than Fraud for Profit, as it is quite normal for interest-only mortgages to be taken out on BTL. Attempting to get a mortgage on an interest-only basis may be a reason why people might be intending to misrepresent themselves and conceal their intentions.

This situation can attract fraud because interest-only is more common and affordability is not as strict on BTL, which may attract those wishing to not pay back capital on their mortgage. This can also attract organised criminals who are not interested in the property itself and simply want access to the lender’s funds.

There are also instances of Fraud for Profit, where professional, organised criminals engage in mortgage fraud simply to abscond with the mortgage proceeds and do not have a preference for a particular mortgage product. In any case, they do not have any intention of making repayments and will typically use false identities, sources of deposit correspondence and bank statements to support the application.

How can advisers protect themselves against fraud?

There are many ways in which advisers can protect themselves against potentially fraudulent activity. Undertaking due diligence is key to this, such as checking documentation and payslips from the applicant. Now that the days of poor quality photos and easily-identifiable obscurities have passed, advisers need to be even more vigilant to ensure they are able to clearly spot potential fraud. Knowing how license numbers are structured can be an example of this, as well as ensuring it matches with the other client details.

Checking the details on bank statements and knowing the expected format can also help confirm validity. There should always be a professional appearance to the statement, with no spelling errors, anomalies or suspect details, as well as showing the correct address as the expected residence.

Ask yourself: Do the credits match those on the payslip? Are they from the correct employer? Are they the right type of payments such as BACS etc? Does the activity on the statement match the current customer profile? Are they recent documents, and if not why can the applicant not provide a more up to date one?

What more can advisers do about fraud?

Working with lenders, networks and each other is a really important step in protecting yourself against fraud. Also, if you have had business introduced to you, ensure that you know as much as you can about them and have asked the right questions to protect yourself. Have you visited their premises? How long have they been in business and what is their reputation? Does anything appear suspicious? In other words, fact find your introducer in the way you would your clients.

If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.

Mortgage Intelligence Insight: Key financial dates for you and your clients in 2016

In a mortgage industry that seems to change as much as the weather in the UK, we have compiled a short list of key financial dates worth noting for you and your client. From scheduled tax changes and the ending of housing schemes to annual speeches and financial events, these important dates will keep you and your clients ahead of the game in 2016.

16 March 2016: Budget Speech

One of the most important events in the industry calendar will be Chancellor George Osborne’s annual Budget speech. After a cautious pre-election budget in 2015, some experts are preparing themselves for more change as the government tackles the housing crisis head on.

Anticipated announcements are on pension taxation and changes to tax relief, possibly moving from a tiered system to a flat rate. But whether more changes are on the way remain to be seen.

21 March 2016: European Mortgage Credit Directive

One of the biggest, yet scarcely mentioned financial changes in 2016 will be the MCD, or European Mortgage Credit Directive. This will come into play in March, introducing an EU-wide framework of conduct rules for all mortgage firms.

Designed to further protect consumers and create a sole European market, our rules will be set by the UK’s Financial Conduct Authority (FCA). The biggest effect this is likely to have on the industry is on buy-to-let mortgages, foreign currency loans and the introduction of a European Standardised Information Sheet (ESIS).

1 April 2016: Stamp Duty BTL

Changes in Stamp Duty Land Tax (SDLT) come into effect on 1 April 2016. This will mean higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes.

Although designed to disincentivise the financial investment in UK property and increase supply for first-time buyers, some experts have questioned the tax increases and feel landlords are being unfairly targeted. Either way, the rush to complete applications has already started in order to avoid the increase in April.

25 November 2016: Autumn Statement

It may not get the same attention as the annual budget speech, but the government’s autumn statement has historically contained some surprising financial announcements, such as changes to stamp duty in 2014 and changes to tax rates last year.

December 2016: End of Help to Buy 2

December will see the end of the government’s Help to Buy: Mortgage Guarantee Scheme. Otherwise known as Help to Buy 2, it has helped many first-time buyers with only a small deposit onto the property ladder.

Unlike the Help to Buy: Equity Loan, which only covers new-build properties, Help to Buy 2 can be used for both new build and existing homes. The scheme is now being withdrawn as lenders bridge the gap, with many now offering mortgages on deposits of 5% without the assistance of government schemes.

TBC: A Base Rate Rise?

The possibility of a Bank of England Base Rate Rise has been the subject of financial speculation for several years now, ever since it was set to its lowest-ever level of 0.5% in 2009. Although many experts suggest that Mark Carney will announce a move on interest rates in late 2016, there are some that still say this will not happen until 2017.

If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.

Mortgage Intelligence Update: Is your client ready for the Mortgage Credit Directive?

Stephen Adams, Head of Compliance at Mortgage Intelligence, explores some of the potential ways the Mortgage Credit Directive could impact your clients.

After the Mortgage Market Review (MMR) in 2014, few expected such a similar piece of legislation to be hot on its heels, let alone affecting the whole European region. But on 21st March 2016 the Mortgage Credit Directive (MCD) will come into effect, in an effort to further protect consumers and create a sole mortgage market in Europe.

Although there is some debate as to whether this further legislation will actually add additional benefits to consumers, it will impact both residential mortgage lending and lending for buy to let. The UK’s regulatory body, the Financial Conduct Authority, with implement the changes here, but what specific areas will be affected?

Buy to Let and Foreign Currency

More specifically consumer buy to let (CBTL), the MCD will cover the minority of buy to lets where the borrower has not taken out the mortgage for business or investment purposes, or as an Investment Property Loan (IPL). From March, certain consumers, or “accidental landlords”, that have had to take out a BTL as a solution to circumstances, such as an inherited home or Let to Buy transaction, will find they fall under the new regulation.

Foreign currency loans will now be subject to further regulation, in some cases restricting the loan size and requiring a warning around possible rate changes. The MCD defines a foreign currency loan as “a mortgage denominated in a currency other than that in which the consumer receives the income”, or if they hold the asset from which the credit is to be repaid”. Because of these changes, there are some lenders that are already withdrawing their lending on foreign currencies.

The Sales Process and the “ESIS“

The European Standardised Information Sheet (ESIS) has been one of the more contentious announcements as part of the MCD. Having to abandon our own Key Facts Illustration (KFI), the UK must now adhere to the new ESIS sheet, or in some cases a KFI Plus prior to application. Many lenders are already adjusting to the new rules, choosing whether to move to the ESIS immediately in March or temporarily to the KFI Plus.

Although the UK’s MMR in 2014 put us in good stead ahead of MCD, the changes are nevertheless conflicting with some of our own regulation that has been tailored towards the UK market. The general sales process, which in each country can vary markedly due to certain differences in mortgage systems and languages, will now be restricted to a standardised, continent-wide law that requires certain steps to be taken before a mortgage is completed.

Protecting the Consumer?

Some experts have criticised the MCD as potentially confusing for consumers, rather than protecting against financial detriment as was the goal of the changes. But either way the MCD is tightening further the rules around financial promotions to be clear and not misleading, which can only help further protect consumers.

The MCD also ensures that lenders are required to now issue binding offers to consumers as well as a seven day reflection period which will start on the issue of the binding mortgage offer. This is designed to deliver peace of mind and further security to consumers.

If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.