FSA 'sees lenders as drug dealers'
Updated on 13 November 2009
The City watchdog was accused of viewing mortgage lenders as being like "drug dealers at the school gates".
The chairman of the Council of Mortgage Lenders said the Financial Services Authority (FSA) saw consumers as "wanton children" who did not know what was good for them.
He said through its proposed reforms to the mortgage market, the regulator was attempting to wrap customers in cotton wool and make borrowing risk free.
Matthew Wyles said: "Increasingly, I also have the feeling that regulators see lenders and intermediaries as the sweetshop owners - or worse, the drug dealers at the school gates - of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes."
The FSA set out proposals for "more intrusive regulation" last month, including the introduction of mortgage affordability tests, and a ban on self-certification loans and mortgages that contained a combination of high-risk characteristics.
But Mr Wyles warned that if the FSA moved away from the principle of caveat emptor, or buyer beware, it did so at great peril.
He said such a move could create the kind of moral hazard the FSA wished to avoid, with consumers feeling they needed to take little or no responsibility for their own financial decisions.
Speaking at the CML's conference, he said: "That's not to say we want consumers to lack adequate protection from their own financial naivety or lack of experience - of course we don't. But there is a balance to be struck."
He warned that the regulator's plans to get lenders to verify all borrowers' income could asphyxiate the market and add extra costs and time delays to mortgage applications.
He said: "It seems we're not even going to be allowed to rely on the borrower's assessment of what they spend on food, booze and fags - but the 'feasibility' tests we're going to have to apply sound pretty clunky, and costly, for consumers."
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