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FCA to launch lenders market study

What is this about?

The Financial and Conduct Authority (FCA) has announced the launch of a targeted market study in the mortgage sector by the end of 2016.

The market study will look at:

  • any unexpected consequences of the Mortgage Market Review;
  • why intermediaries have such a strong position in the market; and
  • if consumers have the necessary tools to get the best deal available for them.

The focus will be on whether there are different outcomes when consumers use brokers or go directly to lenders. The FCA will also check lender/broker relationships and contracts. 

The study will review any barriers to entry and innovation and if specific consumer segments have access to all available mortgages offered, particularly focusing on vulnerable consumers with no online access.

Overall, the FCA will examine the relationships between brokers, lenders, price comparison websites and estate agents, to establish whether this is detrimental to the good functioning of the market and interests of consumers. 

For more details please see FCA's announcement.

How does this affect you?

When the study is launched, the FCA will gather information through surveys and direct requests for information from mortgage lenders and other stakeholders. 

This is likely to be an intensive and detailed exercise requiring significant resource from some legal and business teams within mortgage lenders to respond on a timely and accurate basis.

Although sometimes onerous, it is also an opportunity for lenders to make their views known, shaping the regulator's conclusions on the good functioning of the sector or concentrating the regulator's focus on those market features (including regulation) that lenders might wish to change. So, while presenting some strategic risks, a study is also a tool to drive positive market developments for businesses in those markets.

Mortgage lenders will also need to provide relevant information regarding their arrangements with intermediaries. It is therefore important for lenders to review these arrangements carefully to ensure they are compliant with competition law.

Legal background

The FCA has the power to conduct market studies in the financial sector when it was granted competition law powers in April 2014. 

Under these powers, the FCA reviews the relevant market and can:

  • make market-wide recommendations (rule making and guidance);
  • propose firm-specific remedies for certain changes;
  • issue a clean bill of health - that no competition concerns exist; or
  • recommend an in depth market investigation to the Competition and Markets Authority (CMA).

In addition, and of equal importance, the FCA can initiate enforcement cases if there is evidence that mortgage lenders could be engaging in anticompetitive agreements or tactics. 

The duration of a market study is approximately 12 months with an interim report published after the first six months.

Throughout the process companies operating in the mortgage market (e.g. lenders) can be expected to provide a lot of information, attend meetings with the regulator and make further submissions.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at 18 November 2016. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

How we can help

If you are affected by any of these developments, we can help.

Whether you're subject to the FCA's investigation and receive a relevant information request or looking to ensure full compliance with competition law, including the Principle 11 mandatory notification requirement, we have the knowledge and experience to assist you.

We provide full legal support to the Financial Services industry and have substantial experience dealing with competition law regulators, helping you to achieve your objectives as quickly and efficiently as possible.

Our Competition team has been involved in numerous market studies and investigations over recent years, including Retail Banking, Private Motor Insurance, Energy, Payday Lending and Digital Comparison Tools. Our experience advising firms during market studies and investigations, enables us to ensure a smooth and effective interaction with the regulator. For further information, please contact TLT's competition team.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.


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