The FCA said lenders and brokers in the second charge mortgage market need to consider how they advise customers, assess affordability and charge fees

Britain’s Financial Conduct Authority (FCA) ​on Thursday ‌called on second charge mortgage ​firms ​to improve consumer protections ⁠after a ​review found ​risks of financial harm to borrowers.

The ​FCA’s review ​found issues related to ‌unclear ⁠fees, inadequate record-keeping, affordability assessments that ​overlooked ​living ⁠costs and steered ​consumers towards ​debt ⁠consolidation without clarification.

The FCA said lenders and brokers in the second charge mortgage market need to consider how they advise customers, assess affordability and charge fees.

Weaknesses in some firms’ practices could put borrowers, particularly those consolidating debt, at increased risk of financial harm, the FCA said.

The FCA’s review found examples of good practice across the sector but also issues that raise concerns about whether firms are meeting expectations, including under the Consumer Duty, which requires financial firms to put customers at the heart of what they do.

Issues identified in the review include affordability assessments that appeared to overlook key living expenses; advice that steered customers towards debt consolidation when it was not clear if it was appropriate. Inadequate record keeping and unclear fees, often added to loans, making comparisons difficult.

The regulator said it is important that advisers focus not only on whether consumers are eligible for the loan, but whether it is genuinely suitable for their needs and circumstances.

Advisers sometimes recommended debt consolidation when it was not clear from the files that it was an appropriate or affordable solution for the consumer, the regulator said. Some firms told consumers upfront that they could not help them consider other options.

David Geale, executive director of payments and digital finance at the FCA, said: The second charge market is relied on by people often already heavily in debt. It’s vital it works well, but we’ve found that standards are not always where they need to be. This needs to change.

The FCA is calling on all second charge firms to consider the findings carefully and take appropriate action.

Brokers for the wider mortgage market should consider the findings, especially on record keeping and quality assurance, and whether they can make improvements, the regulator said.