2 May 2011 

http://www.mortgagestrategy.co.uk/latest-news/eu-proposal-contravenes-money-laundering-rules/1030367.article

New European mortgage rules that require lenders to provide reasons why borrowers are rejected clashes with money laundering regulations, the Building Societies Association claims.

The European directive on credit agreements for residential property says lenders must give customers a reason if they are refused a mortgage.

They must also provide details of their internal loan processes and external credit checks.

But the BSA says the directive clashes with the UK’s Proceeds of Crime Act 2002 and guidance for the financial sector from the Joint Money Laundering Steering Group.

The guidance says it is a criminal offence for lenders to release information that is likely to prejudice any investigation of customers.

It also states that lenders cannot tell customers that a transaction is being delayed or investigated.

Sharon Chapman, policy adviser on mortgages at the BSA, says lenders are prohibited from giving information in certain cases.

She says: “The European mortgage directive clashes with money laundering regulations so the rules may need to change.

“Another concern is that giving consumers a reason for rejection could allow them to challenge the reason and bring a case against the lender.”

The Council of Mortgage Lenders also claims the information provided by the rule change could benefit fraudsters.

The directive was published last month and the consultation period has ended. It is currently passing through the European parliamentary process.

The BSA estimates the directive will either be amended and passed or blocked within the next 12 months.