The CLC have issued a warning in response to the recent decision by HSBC to launch a lenders panel with just 43 members – a move which has raised a number of concerns amongst the profession. The warning press release is set out below in full.
CLC Chief Executive Victor Olowe said: "This recent move by HSBC highlights the challenges in balancing the interests of institutional consumers with those of other consumers. Whilst lenders have every right to decide the make-up of their panels, we do share concerns that such a limited size panel risks inadvertently restricting consumer choice and distorting competition in the conveyancing market.
CLC and HSBC
Since the announcement about the new panel, CLC has been in close contact with HSBC and has been seeking clarification on a number of matters. Mr Olowe explained: "We have been in discussion with HSBC regarding the number of panel members and raised concerns about the adequacy of a panel of this size to cover the interests of consumers.
"We understand that HSBC’s decision to have a relatively small panel is underpinned by their assessment of current capability and capacity to maintain appropriate ongoing due diligence checks on the panel members. HSBC has assured us that they will review the panel on an ongoing basis, and will adjust the size as necessary to meet demand. This is an issue we will continue to monitor closely."
The CLC’s role as a regulatory body is to protect the interests of the public and promote consumer choice. It has therefore welcomed assurances from other major lenders that they are unlikely to adopt a similar approach to HSBC. Mr Olowe said: "HSBC maintain that their panel arrangements support consumer choice at competitive fees. However, our concern, if this type of approach did become more widespread, is the extent to which the legitimate choice of individual consumers could be compromised by powerful institutional consumers. If the choice of lenders adversely compromises the choices of many individual consumers, it might be in the public interest for us to consider requiring each party to have separate representation on all future transactions.
"Clearly, such an arrangement would in itself raise other challenges and therefore should not be considered lightly and would require a coordinated approach across all relevant regulators and professional bodies in the conveyancing market."
The issue has highlighted the need for consumers to better understand what they are currently paying for, such as the previously hidden cost of the work done for the lender. Mr Olowe said: "Despite the potential risks, the move by HSBC does have the advantage of providing better transparency in the structure of fees. This will mean greater clarity for consumers, and will also highlight how in many cases the existing price propositions in the market undervalue the work of lawyers."
Code of Conduct
Licensed conveyancers are particularly concerned about the implications of the required undertakings in separate representation transactions. Mr Olowe explained: "We are working with HSBC to resolve this issue as quickly as possible. This is in order to avoid licensed conveyancers being put at risk of breaching our Code of Conduct and compromising the indemnity insurance cover for such transactions. We are confident that this matter can be resolved swiftly in the best interests of the effective operation of the home buying and selling market."
The CLC has welcomed the HSBC decision to appoint a division of the Countrywide group (of which the CLC-regulated firm Countrywide Property Services is also a separate division) to manage the new lenders panel. Victor Olowe said: "This is a good example of the types of opportunities for innovation and growth that Alternative Business Structures are designed to deliver.
"Having made their decision to create this smaller panel, we do at least welcome that HSBC has recognised the strength of CLC regulation by including four of our members on it" he said. "Whilst we recognise there have been commendable efforts elsewhere to demonstrate quality assurance, we are pleased that the strong, uncompromising and intelligent regulation offered by the CLC is recognised as sufficient for membership of this and many other panels."