In our blog Financial Conduct Authority consults on collection of personal data posted on 23rd July we highlighted a consultationbeing undertaken by The Financial Conduct Authority (FCA) proposing increased submission of personal data from mortgage lenders.
In a detailed response challenging the FCA data reporting proposals the Council of Mortgage Lenders (CML) state that the proposed lenders' data reporting requirements "represent a sea change in the scale and nature of what firms are required to do."
The CML point out that firms already report 31 separate items of data to the FCA on each of up to 250,000 new sales each quarter. But the FCA proposals represent a massive increase on this to 130 items, reported for the entire regulated loan book of around 7 million loans.
The CML response goes on to state "With the reporting burden increased to this degree, we believe it is vital that the FCA sets out clearly how it will use this greatly increased amount of data effectively, so that firms better understand the justification."
The CML in one of the three key points in their response raise the concerns of many in the mortgage industry who believe that the wording in the consultation paper, together with the level of proposed detail on affordability data, means that the FCA intends to use the information to replicate firms’ underwriting processes on a loan by loan basis.
The CML response makes clear that the mortgage industry believes the data is clearly not suitable for this purpose and doing so would inevitably lead to inconsistent and often erroneous judgements on underwriting quality.
The CML in seeking to re-assure firms that the FCA will only collect data which it will be able to use effectively has asked that the FCA to confirm that it does not intend to use the data in this way, and at the same time, outline how it will use this level of detailed data effectively.
Given the size and scope of the proposals, the CML have urged the FCA to engage with technical experts from the industry at a technical forum which the CML have offered to facilitate to iron out the numerous technical questions and to establish clear definitions before the FCA issues its final reporting rules.
This technical forum would allow CML to work with the regulator to ensure that the data fulfils the FCA’s objectives effectively without imposing a disproportionate burden on firms.
The CML also believe that the FCA’s cost benefit analysis of its data reporting proposals is flawed even on the basis of the very partial information firms provided to it, costs look to be significantly greater than FCA estimated in the consultation paper. These proposals come at a time when the mortgage industry is already fully engaged with implementing the Mortgage Market Review provisions with significant resources diverted to this purpose.
In conclusion the CML state that the FCA needs to ensure that what it requires of lenders is fully fit for purpose, and that the timelines it requires are deliverable. The CML believe that data reporting proposals raises issues that are far more complex than the FCA had originally considered and in the CML’s view, there is a real need to get this right from the outset, so that FCA and lenders have the data that allows effective and consistent regulation.
The consultation period has now ended and the mortgage industry waits with interest on what the FCA response will be when they publish their conclusions later this year.
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