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Since October companies have been required to supply customers with an initial disclosure document, which details the services it provides, and a key facts illustration giving personalised information about costs and risks of products. The documents are part of the regulator's drive to improve customer understanding of mortgages.
 
The City watchdog said it had identified the three sub-prime firms - who lend to customers on elevated credit risk - as having helped customers overstate their income to obtain a larger mortgage. This could be an indication that brokers are acting aggressively in their efforts to get business from people who do not qualify for mortgages. The FSA refused to name the firms.
 
"It is difficult to establish the level of consumer detriment or potential mis-selling as many of the failings related to poor record-keeping and brokers could provide more detail when challenged, but we will be looking for better evidence of compliance with our requirements," said Mr Watson.
 
The investigation underscores a warning delivered by the FSA in May, when it told chief executives of mortgage lenders to improve the information they gave consumers about home loans.
 
The Association of Mortgage Intermediaries, the industry trade body that represents sub-prime brokers, called the alleged income exaggeration "extremely regrettable".
 
Ben Stafford, director of policy at the AMI, said: "This is a regulated market now and any firms that inflate income or don't put the proper procedures in place could face exposure and action from
 

 

 

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