Financial Conduct Authority  

FCA mulls expanding regulatory scope

FCA mulls expanding regulatory scope

The Financial Conduct Authority is "taking seriously" the option of extending its regulatory perimeter to help mortgage prisoners.

Giving evidence before the Treasury select committee today (June 25), the FCA boss Andrew Bailey said one of the only ways to protect consumers stuck on high rates with unauthorised and inactive lenders was to widen the scope of FCA regulation.

This was because not all mortgage prisoners would be helped by the FCA's proposed shake up of the mortgage rules.

Mortgage lending generally speaking is regulated but borrowers can find themselves stuck with an unregulated lender if their loan was sold on as part of a loan book sale.

In March, the FCA proposed changes to mortgage rules to try and help such consumers but both the regulator and the government admitted the rules would not help all affected.

Mr Bailey told MPs today: "We know that there’s a portion of the population that will not benefit from the consultation we’re doing. So what do we do about that?

"We have to take seriously extending the regulatory perimeter and saying that mortgage lending should be a regulated activity because that would allow us to make rules in that space.

"I’ve been thinking a lot about it and I don’t know of another solution to this, honestly."

Mr Bailey said that although the FCA did authorise mortgage administrators, he didn’t think changes in this area would bring about the substantial change he wanted to achieve.

In today’s session he went one step further and would widen the regulatory scope to include all mortgage lending.

According to the FCA boss, if this were to happen, the City-watchdog could create rules in this space that protect consumers who are unable to switch even under the new rules.

In the FCA’s annual perimeter report, published last week (June 19), the regulator admitted it could not currently offer the same level of protection for consumers with mortgages that were bought by an unauthorised lender as it could for regulated firms.

Despite the fact an FCA authorised administrator was required for the sale, the report stated firms could structure the sale in a way which meant the regulator could not protect the consumer in the same manner.

Unauthorised lenders are also not able to offer new products to their customers.

Mr Bailey said the FCA had not had the conversation about expanding the perimeter with the Treasury yet and Ms Morgan said the "committee might have it for him".

Mortgage prisoners are predominantly borrowers who took out a mortgage before the financial crisis but are now blocked from switching to better rates due to changes in lending practices.

Many are told they "cannot afford" the new deal even though the monthly payments are sometimes cheaper than their current policy.

The proposed rule changes include a "modified affordability assessment" meaning they would no longer have to abide by certain affordability rules such as income certification.