Secured Loans – Time to Regulate

During a recent speech the outgoing chief executive of the Financial Services Authority (FSA) publicly stated that he would like to see secured loans come within the regulatory umbrella of the FSA’s control.

It was suggested that the current regulatory regime, with the office of fair trading (OFT) covering some consumer transactions, and not others was disjointed. Currently the FSA regulate all first charge loans on owner occupied properties with the OFT regulating second charge loans under £25,000. Secured Loans over £25,001 are currently not regulated by either authority.

One of the arguments for letting the FSA take over regulation of the secured loan market is that it will make it easier for lenders and brokers to deal with just one regulator. Although the counter argument is that the mortgage market and the secured loan market are very different beasts.

In the event that the secured loans market became regulated by the FSA the biggest casualty would probably be the smaller brokers. The costs associated with compliance can be crippling to all but the big players.

Of course these were just the comments of the outgoing chief executive of the FSA. In reality it is unlikely he would have made these comments if any change was imminent. The most likely outcome is that the government will be watching the effects of the implementation of the revised Consumer Credit Act 2004 (CCA), this changes many of the current regulations covering secured loans and could satisfy demands for more regulation.

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