With the ever nearing regulation of mortgages and general insurance products, the Treasury has decided to consult about who should deal with complaints arising from these areas. But, the debate is not about who should deal with complaints after regulation is introduced, but before.
Currently, although mortgages and general insurance are not technically regulated, there are two voluntary trade bodies that brokers subscribe to. This is the Mortgage Code Compliance Board (for mortgages) and the General Insurance Standards Council (for general insurance).
Each of these bodies have codes of conduct by which their voluntary members must adhere to. There are also complaints processes in place, should anything go wrong. The Treasury is consulting as to whether these complaints processes should remain or whether the Financial Ombudsman Service should be given the power to deal with any complaints prior to FSA regulation.
Our View
In the period before regulation is introduced there is always a black hole and consumers will be disadvantaged by it. We have seen the effects of this over the last few years, especially with endowment mortgages. Many were purchased before regulation was introduced and the amount of consumer protection is minimal.
We believe that this issue should already have been clarified as regulation for mortgages and general insurance has been on the cards for a long time. Many mortgage and general insurance brokers see regulation as a blow to their businesses and levels of business will fall off, due to the administrative burdens of regulation.
This could lead to a culture of getting business in before regulation hits and this could seriously affect consumers.
If you are taking on a mortgage or any form of general insurance and you are being advised that the product is the best for you, check how your adviser is progressing towards regulation and ask how your dealings will change once it has been introduced.
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