On 29 October 2020, the FCA published a Dear CEO letter it had sent to those firms allocated to the Mortgage Intermediaries portfolio.

In the Dear CEO letter the FCA:

  • Sets out its view of the key risks mortgage intermediaries pose to their consumers or the markets in which they operate.
  • Outlines its expectations of mortgage intermediaries, including how such firms should be mitigating these key risks.
  • Describes its supervisory strategy and programme of work to ensure that mortgage intermediaries are meeting its expectations, and harms and risks of harm are being remedied and/or mitigated.

In terms of supervision, the FCA reports that in prioritising its work it is focussing on second charge and lifetime mortgages.

In relation to second charge mortgages, the FCA states that it will be reviewing a sample of firms’ advice in this area to consider the suitability of the advice, if customers are getting a product that meets their needs and if customers have understood the product and have been treated fairly throughout the process. The FCA will also be considering how the fees and charges payable by the customer are described to them and whether these may be considered excessive. The FCA aims to carry out this work in 2021.

For lifetime mortgages, the FCA will be assessing whether firms have made any necessary changes following the publication this summer of the key findings from its exploratory work on later life lending. Before it does this, the FCA will give firms time to assess what they need to do, and to introduce and embed any changes required. The FCA warns that if it finds that firms have not made the necessary changes to mitigate any previous harms it identified, it will consider further intervention and appropriate action. The FCA will also be investigating how firms describe the fees and charges payable to the customer and whether these might be considered excessive. It will aim to carry this work out in the first half of 2021.

At the end of the Dear CEO letter the FCA covers the Senior Managers and Certification Regime (SM&CR). The FCA states that it will assess how firms have allocated individual responsibilities across their Senior Managers, and how those Senior Managers discharge their personal accountability. The FCA expects firms to create a healthy culture where the risk of misconduct is minimised. The FCA also reminds CEOs that their firm has until 31 March 2021 to ensure that all staff in Certified roles are fit and proper to perform those roles and that Senior Managers and Certified staff should already have been trained on the Conduct Rules, and the firm also has until 31 March 2021 to train its other staff.