26 September, 2014
The Mortgage Credit Directive is a major challenge for the industry but changes should be minimal, FCA director of policy David Geale has said.
Geale said that whilst the implementation of the Mortgage Credit Directive seemed like a “dot on the landscape” the market needed to start preparing itself.
He said: “It [the MCD] will be a major challenge going forward. We have worked hard to minimise the impact of the MCD and the Mortgage Market Review was built to go in the direction of travel,
“The UK is very much ahead of the curve [on the MCD].”
Geale said the first charge market should be well prepared for the implementation of the MCD with all intermediaries that currently write business having level three qualifications.
However, he conceded that those in back office functions, such as underwriters, would need to achieve the proper level of qualification.
The level three qualification requirement will also be extended to the second charge market with Geale saying that he “sees no need for a separate second charge qualification”.
The biggest impact of the MCD will be the change from the standard KFI to an ESIS. However the regulator has said firms have until 2019 to implement ESIS.
Geale said: “We understand this change will involve additional costs for firms and as such they will be able to continue using the KFI until 2019.
“However, there will be certain top up disclosures, including the seven day reflection period. To minimise the costs incurred these top ups can be done separately from the KFI.”
But Ray Boulger, senior technical manager at John Charcol, said dismissed the reflection period as academic and said the ESIS itself would be the biggest change for consumers.
He said: “As far as consumers are concerned the seven day reflection period is academic as they have the ability to opt out.
“ESIS will be the biggest change that consumers see and the addition of an amortization breakdown, which I believe will be included in the ESIS, will be a good thing.
“If it’s not included the FCA should certainly consider it.”
Geale was speaking at the Financial Services Expo at London’s Billingsgate.