FSA targets 'sub-prime' mortgage brokers

MORTGAGE brokers targeting vulnerable "sub-prime" borrowers have come in for criticism from the Financial Services Authority (FSA) which has told 200 firms to withdraw or amend misleading advertising.

The regulator said yesterday that poor financial promotion by advisers trying to win customers who have poor credit ratings, such as a history of defaults on mortgage repayments, was an indication of more deep-rooted problems. These include having inadequate systems and controls in place to manage their businesses.

Over the past year, the FSA has reviewed several hundred advertisements and promotional materials.

It visited the worst offenders this month and last and found where poor promotional materials had been issued, there were usually wider problems. A number of these firms have now been referred to the FSA's enforcement division for further investigation to decide on the next course of action.

Vernon Everitt, FSA retail themes director, said: "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. We need to see standards here rising - and fast."

Examples of misleading information included lack of transparency in fee disclosure and customers being sold sub-prime mortgages with higher rates than mainstream products despite there being no history of poor credit.