Select Committee on Regulatory Reform Third Report

4  Impact Assessment

23.  It is expected that the proposal to exempt buy-to-let lending from regulation will create no extra cost to industry (or detriment to consumers).[16] Indeed, without the exemption, the creditors concerned would be required to introduce expensive systems changes. An independent assessment estimated the cost of so doing to be £100 million for one-off transitional arrangements (involving systems, form changes and staff training) and £500,000 per annum continuing costs spread over 80 creditors.[17] The Explanatory Document says:

"Although we are proposing to extend the exemption to buy-to-let loans of any value, the impact of this will be negligible as buy-to-let loans of £25,000 or less are few if any in today's market…Buy-to-let investors will benefit as a consequence of there being no disruption to the market (either permanent or temporary) and creditors not passing on to them the costs of any significant changes through increased charges and product costs".[18]

24.  If the proposals in the draft Order are agreed compliance costs with regard to the giving of statements and notices of arrears of payments will still arise. These have been estimated at around £500 million for the industry as a whole.[19] The proposals would retain such costs at expected levels. However, if the proposals in the draft Order are not introduced, it is argued that additional compliance costs of about £26 million for one-off transitional arrangements and approximately £49 million in continuing costs would be incurred.[20] The likelihood here is that the ensuing higher product costs would be borne by consumers. In terms of statements and notices, a further positive impact of the draft Order being agreed would be:

"…clarity for consumers who will receive statements and notices in a consistent manner that they understand".[21]

16   ED p5, para14. Back

17   Ibid. Back

18   ED p6, para14. Back

19   ED, p6, para15. Back

20   Ibid. Back

21   Ibid. Back

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