tmacompliancebulletin

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November 2016

our experience is vast.our knowledge is great. we’ve been around fora long time and we willshare all we know with you.

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Welcome to the TMA Compliance Bulletin, this edition aims to make you aware of the latest regulatory updates that are likely to impact on your customers and your business together with useful guidance and important news where you may need to take action.

AT A GLANCE

FCA Live & Local Events

Introducers

Advising on P2P Agreements

New Complaints Handling Rules

The FOS and Buy to Let Complaints

Buy to Let underwriting issues

Evidence of Self Employed income Online Dispute Resolution Platform

Yahoo hacked

welcome.

FCA Live and local events

The FCA still have a number of Live and Local events yet to run – the sessions are aimed at regulated firms in the investment, general insurance and mortgage sectors. We recommend that you attend a session, in particular the “Positive compliance: mortgages - the advice process” session which will be of relevance to you (current cost £85 inclusive VAT per person per session).

They are visiting the West Midlands in November, which includes Dudley, Stoke on Trent, Birmingham and Coventry.

PRIVATE AND CONFIDENTIAL

Further events will also take place in London in December, Yorkshire in January, the South East in February and finally the North West of England in March 2017. Attend an event where possible!For additional details and event dates, please click on the following link:https://www.fca.org.uk/events/live-local

introducers

The FCA has recently highlighted some of the risks of authorised firms accepting business from unauthorised introducers and/or lead generators.

If customers are given unsuitable advice by an introducer, the authorised firm may be held responsible and subject to regulatory action. Many authorised firms receive customer introductions from introducers.

The FCA are very concerned at the increase they have seen in cases in which the introducer has an inappropriate influence on how the authorised firm carries out its business, in particular where the introducer influences the final product choice.

Our key message to you is don’t let the introducer interfere!

Although this FCA statement relates to investment and pension firms, the principles are still relevant to this sector. Please ensure you carry out suitable due diligence on all introducers and carry out the full sales process yourself from start to finish, that includes collection of Identification and recommending the most suitable product.

advising on p2p agreements - do you still have a permission that you don’t

need

As a reminder, peer-to-peer lending (sometimes abbreviated as P2P lending), is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.

Firms automatically had their permissions varied to add the new regulated activity of “advising on peer to peer (P2P) agreements” from 6 April 2016 if they already had in place the permission to provide advice on non-investment insurance contracts, i.e. pure protection products.

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Willl I need to pay a fee? Firms that received the new permission will not pay additional FCA regulatory fees for holding the P2P advice permission, unless they will earn income from that business. However, firms who do not undertake designated investment business will be subject to an additional fee in relation to the Financial Ombudsman Service which is currently £45 and will not be charged until the 2017/18 financial year.

Removing the permission If you decide that your firm is not going to advise on P2P agreements now, or in the future, and would like to remove the permission, please complete the FCA’s short: variation of permission form which is still available and send it to: P2Padvice@fca.org.uk - you should title the email with your Firm Reference Number and Firm Name only.

On receipt, the FCA will aim to remove the permission within 3 weeks.

We understand the above simplified form is still available to complete but when this facility is removed, the request will have to be placed via the usual Connect system – still no fee but somewhat more time consuming.

New complaints handling rules As a reminder, new changes to the rules came into force 30 June 2016 in relation to complaints handling procedures. The changes relate to the treatment of next business day complaints (handling, reporting and writing to clients) and also wider complaints data reporting.

It is still apparent that not all firms are aware of these changes and as a result, here is a refresher:

extending the ‘next business day rule’, where firms are permitted to handle complaints less formally, without sending a final response letter, to the close of three business days after the date of receipt

reporting all complaints, including those handled by the close of three business days after the firm receives them

raising consumer awareness of the ombudsman service, by sending a ‘summary resolution communication’ following the resolution of complaints handled by the close of the third business day after receipt

PRIVATE AND CONFIDENTIAL

new rules limiting the cost of calls consumers make to firms to a maximum ‘basic rate’, including all post-contractual calls and all complaints calls

more detailed ‘complaints return’ which requires firms to send to the FCA data twice a year on the number of complaints they receive: https://www.handbook.fca.org.uk/handbook/DISP/1/Annex1.html?date=2016-06-30

It is essential therefore that you become familiar with the new rules and update any complaint handling procedure manuals and processes that you may already have.

TMA are more than happy to discuss the new requirements with you and offer face to face training and/or telephone support so please feel free to request this by emailing compliance@tmaclub.com

TMA have also created a revised suite of documents for you to purchase at a small cost of £25 + VAT – these helpful documents will compliment any firm and includes complaint handling procedures, template letters and a revised register.

Again please contact TMA if you wish to purchase these documents by completing this short on line submission form.

For more detailed information, please click on the following link: http://www.fca.org.uk/news/ps15-19-improving-complaints-handling.

Does the second charge market look any different to you 6 months on from the implementation of MCD?

For brokers possibly not in reality. You are encouraged to consider all forms of borrowing when discussing re-mortgage options with a client but the practicalities of sourcing a ‘second charge’ now as opposed to a ‘secured loan’ are probably little different. For us as a packager it is a very different environment.

The umbrella of regulation now encompasses the second charge market but unless you are sourcing, recommending and completing loans direct, the impact is minimal. You may need to evidence that further advances, second charges or even unsecured loans have been considered. Some brokers have chosen to focus only on the first charge market so is there little more to do than investigate and discount these options?

If the client’s current lender will not grant a further advance, or to do so will jeopardise a preferential rate and/or the interest-only package and a re-mortgage will cost heavily in Early Repayment Charges how you do investigate the other options will be crucial.

If you suggest to a client that the second charge route is the most suitable option what will we need to know in order to help you?

Positive’s Broker Consultants will provide you with basic information regarding products based on Loan to Value but the more information given, the better the search and more accurate the illustration will be. Whether you call us or use our 360 sourcing system, you will not have the lender hidden from you. When you contact us we will ask you to explain the options already considered and why a second charge is suitable. If you are advising the client then this is for our records only, but if we are advising this will form part of our Suitability Letter. The Regulator has highlighted from thematic reviews and arrow visit de-briefs that they expect to understand why a second charge has been considered.

A simple application form gathers all the information we need to fully assess a case. This will involve a soft footprint credit search and Electronic Identity Verification (which can also leave a soft footprint record on a client’s credit file). Positive’s Secured Loan Team will review the information and advise you if the original lender product still fits or, if required, why a different lender is recommended. Lender criteria and client circumstances may dictate this and all lenders have the unique selling points, as you are aware.

Once we have the client assent the lending pack is issued to them direct. If you are advising we will send you an electronic copy for your records but part of our Anti-Money Laundering process is to write to the client. Positive’s underwriting team then work with you and/or the client to gather the specific information required by the lender; they arrange third party consent and valuations and submit the case to the bank. With Automated Valuations and Electronic Signatures cases can complete in a matter of days rather than weeks. As we rely on third party lenders and surveyors, the exact time-frame cannot be guaranteed but you can rest assured that our team works diligently to assure the fastest possible process for your clients.

Completion! We pay that day, 100% of the case procuration fee to the advising introducer. The majority of lenders offer a 2% procuration fee. You will be advised of the case value at the outset. In terms of fees, your client will only be charged £995 (£1,495 if Buy To Let) plus any valuation fee (if charged) and any third party referencing costs (if charged). All fees are disclosed upfront where possible or will be explained and included in the binding offer if we cannot accurately give reference or valuation costs initially.

What more do you need to know? Call Positive Lending on 01202 850 830 and ask…

Compliance: second charge mortgages

tma article, november 2016

Alec WimbletonCompliance DirectorPositive Lending

the financial ombudsman service (FOS) and buy to let complaints

So your firm does the occasional bit of buy to let mortgage finance for investor landlords (BTL). BTL products are not and never have been regulated – right? If a customer complains, you can sort it out without having to think about if you have to offer the customer a right to refer to the FOS – right? The answer is – it depends.

We are seeing an increasing trend in the FOS claiming jurisdiction over the resolution of certain BTL complaints, notwithstanding that the FOS does usually acknowledge that the product of the BTL mortgage itself has never been regulated by FCA rules and guidance.

Why is this? It’s due to a fairly complicated interplay between the historic regulation of consumer credit activities and the transfer of jurisdiction over consumer credit from the Office of Fair Trading (OFT) to the FCA in April 2014. Prior to April 2014, most mortgage brokers were registered with the OFT to undertake credit broking activities. Quite why this registration was required was never particularly clear; nonetheless we carried on regardless.

When consumer credit came under the supervision of the FCA, there was a change to the definition of Credit Broking. This made it clear that the introduction of customers to sources of credit, including BTL lenders, meant that firms would be carrying out the FCA regulated activity of credit broking and would require FCA permission to that effect.

This changed again on 21st March 2016 with the coming into effect of the Mortgage Credit Directive (MCD) and yet more regulatory tinkering with various definitions in the FCA Handbook. The practical effect of the MCD changes was to take BTL transactions for investor or business landlords outside regulation altogether. Firms now do not require a consumer credit permission to introduce customers of BTL finance to BTL lenders.

So back to the FOS who are claiming jurisdiction over BTL complaints where customers complain about BTL advice received during the period April 2014 to March 2016. This is the because act of introducing the customer to the source of credit did comprise the FCA regulated activity of credit broking for that time period.

There are certain rules in the Consumer Credit Act 1974 (CCA) (as amended) regarding the refund of fees charged by firms for credit broking where cases do not go on to complete which the FOS seeks to apply when considering BTL complaints (s.155 of the CCA if you are interested).

If the rules do apply to your case then you will be expected to refund the broker fee, less £5.

Does the second charge market look any different to you 6 months on from the implementation of MCD?

For brokers possibly not in reality. You are encouraged to consider all forms of borrowing when discussing re-mortgage options with a client but the practicalities of sourcing a ‘second charge’ now as opposed to a ‘secured loan’ are probably little different. For us as a packager it is a very different environment.

The umbrella of regulation now encompasses the second charge market but unless you are sourcing, recommending and completing loans direct, the impact is minimal. You may need to evidence that further advances, second charges or even unsecured loans have been considered. Some brokers have chosen to focus only on the first charge market so is there little more to do than investigate and discount these options?

If the client’s current lender will not grant a further advance, or to do so will jeopardise a preferential rate and/or the interest-only package and a re-mortgage will cost heavily in Early Repayment Charges how you do investigate the other options will be crucial.

If you suggest to a client that the second charge route is the most suitable option what will we need to know in order to help you?

Positive’s Broker Consultants will provide you with basic information regarding products based on Loan to Value but the more information given, the better the search and more accurate the illustration will be. Whether you call us or use our 360 sourcing system, you will not have the lender hidden from you. When you contact us we will ask you to explain the options already considered and why a second charge is suitable. If you are advising the client then this is for our records only, but if we are advising this will form part of our Suitability Letter. The Regulator has highlighted from thematic reviews and arrow visit de-briefs that they expect to understand why a second charge has been considered.

A simple application form gathers all the information we need to fully assess a case. This will involve a soft footprint credit search and Electronic Identity Verification (which can also leave a soft footprint record on a client’s credit file). Positive’s Secured Loan Team will review the information and advise you if the original lender product still fits or, if required, why a different lender is recommended. Lender criteria and client circumstances may dictate this and all lenders have the unique selling points, as you are aware.

Once we have the client assent the lending pack is issued to them direct. If you are advising we will send you an electronic copy for your records but part of our Anti-Money Laundering process is to write to the client. Positive’s underwriting team then work with you and/or the client to gather the specific information required by the lender; they arrange third party consent and valuations and submit the case to the bank. With Automated Valuations and Electronic Signatures cases can complete in a matter of days rather than weeks. As we rely on third party lenders and surveyors, the exact time-frame cannot be guaranteed but you can rest assured that our team works diligently to assure the fastest possible process for your clients.

Completion! We pay that day, 100% of the case procuration fee to the advising introducer. The majority of lenders offer a 2% procuration fee. You will be advised of the case value at the outset. In terms of fees, your client will only be charged £995 (£1,495 if Buy To Let) plus any valuation fee (if charged) and any third party referencing costs (if charged). All fees are disclosed upfront where possible or will be explained and included in the binding offer if we cannot accurately give reference or valuation costs initially.

What more do you need to know? Call Positive Lending on 01202 850 830 and ask…

Compliance: second charge mortgages

tma article, november 2016

Alec WimbletonCompliance DirectorPositive Lending

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epra issues buy-to-let underwriting standards expectations

The Prudential Regulation Authority (PRA) has announced recently its expectations of firms’ underwriting standards to apply to the buy-to-let market.

It follows a review of the buy-to-let market in 2015/2016. The PRA’s actions are intended to bring all lenders up to prevailing market standards and guard against any slipping of underwriting standards during a period in which firms’ growth plans could be challenged by the changing economic landscape and the impact of forthcoming tax changes.

The PRA’s supervisory statement outlines minimum expectations that firms should meet in underwriting buy-to-let mortgages, specifically:

Affordability assessments should take into account: borrower’s costs including tax liabilities, verified personal income (where used by the lender) and possible future interest rate increases. When setting the expectations for future interest rate increases, the PRA reviewed the prevailing standards in the industry and considered the impact of changes in interest rates, and calibrated the stressed rate accordingly.

Lending to portfolio landlords (defined by the PRA as being those with four or more mortgaged buy-to-let properties) should be assessed using a specialist underwriting process.

The PRA wishes to clarify that the provision in Capital Requirements Regulation (CRR) which reduces the capital requirements on loans to small and medium-sized enterprises by around 25% should not be applied where the purpose of the borrowing is to support buy-to-let business.

Know your lenders eligibility criteria.

There is an implementation timeline of 1 January 2017 for the more straightforward changes, and 30 September 2017 for the remainder.

The PRA will continue to monitor the buy-to-let market and how these standards impact new buy-to-let lending. The PRA will also consider a thematic review in early 2018 to assess firms’ implementation of this supervisory statement.

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We’ll complete youAll good things start with a ‘yes’. Like approving a mortgage application. It’s how we keep your business growing and your clients happy.

0345 070 1999

At Platform, we like to say “yes” so it’s good to know in 2015 we approved a mortgage every 8 minutes*. Whether mainstream or buy to let, we offer a great range of products to meet your clients’ needs.

Visit platform.co.uk todayOr call our Broker Support Team on 0345 070 1999**

*Yes is based on all mortgage offers made to applications received from 1 January 2015 to 31 December 2015 taking a Platform product. **Calls to 03 numbers cost the same as calls to numbers starting with 01 and 02. Calls may be monitored or recorded for security and training purposes. Lines are open between 9am and 5pm Monday to Wednesday and Friday and between 10am and 5pm on Thursday. The Co-operative Bank p.l.c. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (No. 121885). The Co-operative Bank, Platform, smile and Britannia are trading names of The Co-operative Bank p.l.c., P.O. Box 101, 1 Balloon Street, Manchester M60 4EP. Registered in England and Wales No. 990937. Credit facilities are provided by The Co-operative Bank p.l.c. and are subject to status and our lending policy. The Bank reserves the right to decline any application for an account or credit facility. The Co-operative Bank p.l.c. is a member of the Council of Mortgage Lenders and subscribes to the Lending Code which is monitored by the Lending Standards Board.

In 2015, we said “yes” every 8 minutes*

8 min

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PRIVATE AND CONFIDENTIAL

We’ll complete youAll good things start with a ‘yes’. Like approving a mortgage application. It’s how we keep your business growing and your clients happy.

0345 070 1999

At Platform, we like to say “yes” so it’s good to know in 2015 we approved a mortgage every 8 minutes*. Whether mainstream or buy to let, we offer a great range of products to meet your clients’ needs.

Visit platform.co.uk todayOr call our Broker Support Team on 0345 070 1999**

*Yes is based on all mortgage offers made to applications received from 1 January 2015 to 31 December 2015 taking a Platform product. **Calls to 03 numbers cost the same as calls to numbers starting with 01 and 02. Calls may be monitored or recorded for security and training purposes. Lines are open between 9am and 5pm Monday to Wednesday and Friday and between 10am and 5pm on Thursday. The Co-operative Bank p.l.c. is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (No. 121885). The Co-operative Bank, Platform, smile and Britannia are trading names of The Co-operative Bank p.l.c., P.O. Box 101, 1 Balloon Street, Manchester M60 4EP. Registered in England and Wales No. 990937. Credit facilities are provided by The Co-operative Bank p.l.c. and are subject to status and our lending policy. The Bank reserves the right to decline any application for an account or credit facility. The Co-operative Bank p.l.c. is a member of the Council of Mortgage Lenders and subscribes to the Lending Code which is monitored by the Lending Standards Board.

In 2015, we said “yes” every 8 minutes*

8 min

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“Tax Year Overview” document for the last 2 years; and

“Tax Calculation” for the last 2 years

Please note that the HMRC documentation set out below may form part of a larger information request of the customer (for example, company accounts or accountants certificates), depending either on the requirements of the lender or where the circumstances of a case require additional due diligence to be undertaken. For customers who file their own self assessment returns on-line:

Guidance on how customers can access each of these documents from the HMRC online system can be accessed here.

In each case the tax return must show as 100% complete and submitted (i.e. not shown as “in progress”) together with the https…. address along the bottom of the form of the print out/PDF and showing the unique taxpayer reference (UTR) of the customer. For customers who use third parties (for example accountants) and therefore commercial software to file returns:

“Tax Year Overview” document for the last 2 years; and

Copy of the tax computation filed by the third party with HMRC on behalf of the customer

You may wish to consider updating your client file standards with regards to documents that are routinely issued by HMRC and that may be used by advisers to assist in the verification of the income of self employed customers.

This follows the gradual phasing out of lenders accepting the SA302 given that this document is capable of being reproduced and manipulated for potentially fraudulent purposes.

The documents listed below could be used as part of the verification and substantiation of the income of self-employed customers.

evidence of self employed income - too much reliance on the SA302?

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In the case of the Tax Year Overview the tax return must show as 100% complete and submitted (i.e. not shown as “in progress”) together with the https…. address along the bottom of the form of the print out/PDF and showing the unique taxpayer reference (UTR) of the customer. For customers whose tax returns have been filed on paper and posted: Our expectation is that HMRC will either continue to issue SA302s or system generated documents that are substantially similar, if not identical, to those listed above.

For this reason the fraud risk remains and we expect firms to apply extra diligence to ascertain the authenticity of the document put forward by the customer.

For example:

Is it accompanied by a HMRC letter?

Why doesn’t the customer file on line?

Does the information contained in the document put forward agree with other information that may have been gathered with regard to income and expenditure – e.g. where tax is due, evidence that this has been paid, income adding up to the gross amount on the tax calculation?

As this could be considered as a fraud risk, we would recommend you consider the above guidance and implement any changes where necessary.

online dispute resolution platform - what is this?

This new platform is an online tool that will allow consumers to make a complaint against a trader where goods or services have been bought online with the aim of resolving the dispute.

Do I need to do anything? Online traders must provide a link to the ODR Platform on their website.The link should be easily accessible for consumers – a logical place would be following your existing complaints procedure information on a website which would also include a contact email address and a supporting statement.

TMA suggest you update your Disclosure Documents, website and even emails where an offer has been made (DD and website amendments should at least cover the basic requirement). An example statement is as follows:

Alternatively, where your complaint relates to products or services purchased online, or by other electronic means such as email, you may refer your complaint to the online dispute resolution platform at: http://ec.europa.eu/odr.

PRIVATE AND CONFIDENTIAL

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Did you know that in June 2016 we made a number of important changes to Introducer Internet and the Mortgage Application Tracking System (MATS) for residential and Buy to Let applications. We continually strive to improve the service we offer you.

Introducer Internet

Upload documents via Introducer Internet and reduce your time to offer

Santander for Intermediaries

NEW evidence requirements will confirm the documents we need to support the application in the ‘Decision’ screen - Applications that meet our Automated Income Verification criteria won’t need any income evidence at AIP or FMA. However, other documents may be needed in relation to lending policy

- The ‘Additional information’ section at FMA gives you the option to upload any other information to support your applications

- Once the FMA has been submitted we reserve the right to request additional information where necessary when assessing the application.

NEW MATS upload facility allows you to upload documents direct from Introducer Internet at the time of FMA submission which is quicker than uploading directly via MATS at a later stage.

If you have any questions please call your dedicated contact.

yahoo hacked - another data security breach in the news

Another week – another household name in the headlines after having it’s data-bases compromised by hackers. This time it was Yahoo who have the misfortune to have to answer questions about their data security, and also why it has taken 2 years to come clean. Click here for the story. So, it was onto the Sky and BT e-mail accounts at the weekend to bolt that stable-door which is the dreaded password and security questions change – easy enough, provided you can remember the previous passwords and security answers! Then to tackle the virtual Grand National fences of, “password not strong enough”, “you can’t use certain characters”, “password must be a certain length”, “must have numbers and letters”, “can’t be something previously used” etc. etc. before settling on a nice clean set of personal security protocols and vowing to upgrade your other accounts to make it easy to remember... a job for next weekend, maybe. For anyone who has only had to deal with the password change, we can count ourselves lucky. Losses of data can also lead to more serious compromises such as fraudulent use of personal details leading to financial losses.

Working in an industry where we have daily access to some of the most sensitive of personal data, including customers financial and health information, we all have a duty of care, and responsibilities under the Data Protection Act, to ensure that our actions don’t lead to the loss of any data. Please ensure you keep up to date with guidance on this topic so that your firm name doesn’t come to the attention of the Information Commissioners Office for the wrong reasons.

If you are interested to see whether any of your e-mail addresses have been compromised, click this link. Enter your e-mail address and search and you’ll get instant feedback.

This may lead you to undertake the password change challenge – if you haven’t already.

TMA have created a useful Data Security guidance document which will help you identify any key IT risks, provide recommendations on how to prevent Data Security breaches which will of course improve the overall systems and controls within your business. if you would like further information or have any queries please contact compliance@tmaclub.com

PRIVATE AND CONFIDENTIAL

you have to learn the rules of the game.then play better than anyone else.”albert einstein

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TMA, Shire House, Birmingham Road, Lichfield, Staffordshire, WS14 9BW www.tmaclub.com.Registered office: Newcastle House, Albany Court, Newcastle Business Park, Newcastle Upon Tyne, Tyne & Wear, NE4 7YB.

TMA is the mortgage club of First Complete Ltd.