The APPG is calling on Andrew Bailey, the FCA’s chief executive, to clarify the FCA’s powers to help mortgage prisoners in unregulated firms or funds.
Mortgage prisoners are consumers who are trapped in their current deal, often with an inactive or unregulated lender. They are sometimes paying far higher rates than they need to.
This group is rejected for all remortgages – cheaper mortgage deals elsewhere – because they don’t meet strict borrowing criteria brought in after the financial crash, even though they are keeping up with repayments.
Seema Malhotra MP, the APPG’s co-chair, said: “Having two levels of regulation is causing real harm, and the confusion surrounding the regulatory perimeter only exacerbates this.
“It is critical that the government steps in to give the FCA the powers it needs to solve this problem once and for all. Too many have suffered for too long.”
In a letter to Mr Bailey, Ms Malhotra said “We are often told that, while a fund may be unregulated, the administrator of that fund is regulated, and therefore has the same obligation to its customers.
“However, it is clear from our discussions regarding both commercial and mortgage lending, this is not the case.”
Ms Malhotra calls on Mr Bailey to set out the key differences and the practical implications for customers who are held by a “normal” regulated lender and an unregulated fund.
She added: “We find that the fact a fund is administered by a regulated entity obfuscates and confuses the true nature of the relationships.”
An FCA spokesperson said: “This is an important issue on which we are in close contact with the APPG, and we will be replying.”
Last month, the consumer rights champion Martin Lewis revealed he was launching a campaign to provide justice for an estimated 170,000 mortgage prisoners.
Mr Lewis, who founded the consumer website MoneySavingExpert.com (MSE), is supporting a study which aims to highlight the economic cost of failing to provide redress for Britain’s mortgage prisoners.
Mr Lewis said last month: “The cost of mortgage prisoners doesn’t just fall on the individuals, it falls across society.
“The impact of leaving people locked in to unaffordable mortgages can be catastrophic. It can leave them dependent on the state, with little savings for old age, and even adding to NHS costs with the hideous and disastrous mental health impact that can occur when you destroy someone’s financial life choices.”
The City Minister John Glen has called on UK lenders to take swift action to ensure Britain’s mortgage prisoners gain access to better deals.