Mortgage brokers in the sub-prime market that issue poor advertising and promotional materials have also been found to have inadequate systems and controls to manage their businesses, according to the UK's Financial Services Authority.
Over the past year, the Financial Services Authority (FSA) has been working with mortgage firms to improve the standards of their advertising and other promotional materials. The watchdog has reviewed several hundred advertisements and promotional materials, including flyers and classified advertisements in directories and regional newspapers. It has told more than 200 mortgage brokers to withdraw or amend misleading advertising.
As part of its proactive strategy, the FSA visited the worst offenders in October and November 2006 and found that, where poor promotional materials had been issued, there were usually wider problems at the mortgage brokers. A number of these firms have now been referred to the FSA’s enforcement division for further investigation.
Financial advertising has a massive influence on the decisions people make. So it must be clear, fair and not misleading, leaving people with a balanced picture of the key pros and cons. This is particularly the case in advertisements by mortgage brokers in the sub-prime market, where people are making one of the most important financial decisions of their lives, commented Vernon Everitt, FSA retail themes director. We need to see standards here rising – and fast.
In the firms visited, examples of misleading information included fee disclosure where the range of fees advertised was very different from what consumers ended up paying. With these firms, customers were also being sold mortgages with sub-prime rates where there was no evidence they had impaired credit.
The work on promotional materials runs alongside another FSA project looking at whether customers are treated fairly throughout the sub-prime mortgage advice and sales process. These findings will be published in summer 2007.