FSA criticises subprime industry

Daily news headlines

The Financial Services Agency (FSA), the UK industry regulator, has found that lenders and intermediaries inadequately assessed and monitored their subprime loan customers.

Clive Briault, managing director of retail markets at the FSA, says: "We are very concerned about these findings. Consumers in the subprime market are vulnerable people who may have high debts or a bad credit history. It is therefore important that they are properly assessed and advised.”

In a review published today, the FSA said that intermediaries:• inadequately assessed consumers’ ability to afford the mortgage in a third of the 485 cases;• inadequately assessed suitability in almost half of the cases.

The FSA was also concerned about the practice of customers self-certifying their income, which occurred in the majority of cases.

The agency said none of the lenders it reviewed had covered all of the responsible lending considerations in their policies, and that in some cases the policies in place were not adhered to. Lenders also failed to look at how these policies were applied, which the FSA said “resulted in the approval of potentially unaffordable mortgages”.

The review looks at the practices of 34 intermediaries and 11 lenders, of which five will face further investigation by the enforcement division of the agency.

The FSA said it would continue to monitor the sub-prime market.

• Tweet  
• Facebook  
• LinkedIn  
• Save this article
• Send to  
• Print this page  

• Topics
• Subprime
• Risk management
• Regulation