The Financial Conduct Authority (FCA) has given a timeline for when it plans to discuss changes to mortgage guidance and retire certain rules.
This is part of its plan to review its requirements following the introduction of Consumer Duty, as it said some of its rules were duplicated.
In May, the FCA will consult on proposals to make it easier for consumers to remortgage with a new lender, reduce borrowing costs through term reductions and discuss options with a firm outside of a regulated advice process.
In June, it will publish a discussion paper covering topics including risk appetite and responsible risk taking, alternative affordability testing and product innovation, lending into later life and consumer information needs.
The FCA said it had already started reviewing its responsible lending and advice rules for mortgages, including looking to simplify requirements, updating or removing requirements covered by Consumer Duty and ensuring it was supporting good customer outcomes.
It said by relying on the duty instead, it would be supporting innovation.
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The regulator said it received responses saying the current mortgage disclosure rules were “too prescriptive” and limited firms’ ability to change information to meet customer needs and adapt to updated preferences, such as using digital sales channels. Respondents said while the rules aimed to reduce harm, they hindered innovation and consumer understanding in practice.
Reducing administrative burden on firms
Where UK-based firms are required to apply to FCA regulations even if they provide products and services to customers outside of the UK, the regulator will seek views on changing this approach. This will start with a review of the insurance sector.
Following its discussion paper on the regulation of commercial and bespoke insurance businesses, where it proposed simplifying rules for insurance firms, the FCA will consult on giving firms more flexibility over how often they review product value and removing the specified minimum hours of training and development needed for insurance employees.
It will also seek views on limiting the application of rules, such as Consumer Duty, outside the UK and a review of more detailed and prescriptive product-specific rules in the Insurance Conduct of Business Sourcebook.
The FCA will work with firms to see how it can give more certainty on its expectations under Consumer Duty for firms in retail distribution chains, particularly those that do not directly interact with retail customers.
By the end of this year, it will pilot a guide for smaller firms, and by the end of April, it will withdraw historical ‘Dear CEO’ communications, while keeping them publicly accessible. Further, it will look at how regularly future communications are reviewed so outdated material is withdrawn.
The FCA found that smaller firms wanted more support in implementing outcomes-focused regulation and dedicated guides to understand requirements in one place. It acknowledged that sector-specific guides created difficulties and a standardised approach did not always work.
To reduce costs and improve clarity, it will retire outdated guidance this year, including guidance in the mortgage and consumer finance sectors, and guidance related to Treating Customers Fairly.
Sarah Pritchard, executive director of supervision, policy, competition and international at the FCA, said: “Now the Consumer Duty is in full force, we’re making changes quickly where stakeholders want us to, to cut unnecessary costs, support growth, and ultimately help consumers get better outcomes.
“These proposals are part of our long-term efforts to future-proof our rules, reduce burdens for financial firms and will help the ambitious government targets to cut the cost of regulation.”