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Do you expect to see less or more second charge mortgage lenders in 2018?

Paul McGerrigan: Your guide to getting ready for regulation

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Paul McGerrigan: Your guide to getting ready for regulation

Loan Talk recently heard from the Chief Executive of, Paul McGerrigan, as the secured loan industry gears up for future FCA regulation in April 2016.

This time next year, our industry will be on the verge of a new age as after some 40 years, second mortgages will be leaving the familiar framework of the Consumer Credit Act and embracing a new world, with the rules and regulations of the Mortgage Credit Directive (MCD).
A European directive, the MCD applies to all lending secured on residential property throughout the European Union and is based on the simple theory that the same rules should apply whether you are looking at a first or subsequent charge.

This means that the artificial division between first and second mortgages will end - resulting in new opportunities and challenges for all.

The Financial Conduct Authority (FCA) published a detailed consultation paper at the end of September setting out the changes that were required for second mortgages to work within the first mortgage framework (MCOB).

This paper also set out a timetable that gave us three key dates:

•         End of Quarter 1 2015

Ok – so it’s not an actual date but, following feedback to the consultation paper, this is when we will see the final rules we will need to work to.

In the next few weeks, the FCA will publish its final, definitive paper.

This is unlikely to differ greatly from the document we have already seen – however it will confirm what lenders and brokers alike need to do to their products and processes to comply approximately 12 months before the next key date.

•         21st March 2016

From this date, Second Mortgages will fall under similar rules to residential mortgages.

For brokers, the main changes will be around the sales process and the information that we need to provide the customer with.

However, the FCA are proposing to delay implementing a number of items – the most obvious for brokers is the need for Second Mortgage “Sellers” to be CeMAP qualified.

The regulator has recognised that it would be difficult to get all staff trained, educated and through the required exams in 12 months, and is therefore proposing to delay this requirement for some 30 months.

•         21st September 2018

After this date, anyone selling second mortgages – or giving consumers advice – will need to be professionally qualified.

In the UK, this means holding the CeMAP qualification and studying for this qualification is designed to ensure two key things:

1. That anyone dealing with consumers, giving advice or arranging loans, should be able to demonstrate that they have the knowledge and competency to do so.

2. That properly qualified and professional sales people are integral to the sales process and help to develop good customer outcomes.

This doesn’t mean that we can forget about training for three years though as with any professional qualification, CeMAP requires serious study and whilst working towards the qualification, advisers will be expected to operate under supervision and be able to demonstrate their knowledge and competency on an ongoing basis.

Over the next few weeks, we should expect to see the final rules from the FCA and these will confirm these dates and set out the work we all need to do to get ready for next year.

Attributed to Paul McGerrigan , Chief Executive of


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