Regulate the Finance Industry as Tightly as the Utilities - Citizens Advice
19th October 2009
Citizens Advice welcomed the FSA proposals published today for tighter control on lending, but said there was the distinct sound of the stable door being closed after the horse had bolted.
CAB Chief Executive Derek Alcorn said:
“This is of course too late for many people, and there is the distinct sound of the stable doors and bolting horses but we welcome the return to an insistence on responsible lending and we hope that the FSA will continue to keep the situation under review. Citizens Advice considers that the finance industry should be regulated as tightly as the utilities, particularly in respect of its interface with socially vulnerable people.”
The Financial Services Authority (FSA) has today set out its proposals for the major reforms required in the UK mortgage market to ensure that it works better for consumers and is sustainable for all market participants.
The key proposals are:
- New affordability tests will be introduced for all mortgages. This will make it the lenders’ responsibility to judge mortgage applicants’ ability to make the monthly payments;
- Banning ‘self-cert’ mortgages. Potential borrowers will have to prove their income;
- Stopping loans which contain certain ‘toxic combinations’, for example, giving a very high loan-to-value ratio loan to an applicant with a poor credit history or a large amount of other credit obligations;
- Putting an end to arrears charges when a borrower is already repaying. This would stop those borrowers who have set up a repayment plan, and are sticking to it, incurring any further charges;
- Requiring all mortgage advisers to be personally accountable to the FSA;
- Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home.
The proposals are designed to tackle the problems identified while maintaining a vibrant and sustainable market. But the FSA has not ruled out further change if the initial proposals do not have sufficient effect, including caps on loan-to-value, loan-to-income or debt-to-income.
Citizens Advice is currently delivering the Young People and Money Training Course on behalf of the FSA across Northern Ireland. The programme aims to empower workers to improve the financial capability and awareness of the young people they work with, and is specifically designed for those who work with young people that are not in education, employment or training.
Notes to Editors:
- Citizens Advice is the largest advice charity in Northern Ireland working against poverty, meeting the information and advice needs of some 92,000 people per year and dealing with over 324,000 issues. Sixty per cent of queries relate to social security. Citizens Advice Northern Ireland has formal links to National Citizens Advice in England and Wales and close working relationships with Citizens Advice Scotland (CAS). Together the three associations constitute the largest advice network in Europe, with over 60 year’s experience of providing advice and information to the public.
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- Citizens Advice is currently managing a £1.2m contract from DETI for the provision of debt advice in Northern Ireland, and a contract from the Social Security Agency for benefit take up which is targeted on 25,000 people.