On Tuesday 7th May 2019, Charlie Elphicke MP will present a Ten Minute Rule Bill Motion entitled Banking (Consumer and Small Business Protection), which will make provisions to enable consumers to transfer mortgages between providers; to prohibit the sale of mortgage debt to unregulated entities; to prevent the foreclosure of certain business loans and to establish a Financial Services Tribunal.
Charlie Elphicke MP, Member of Parliament for Dover, said: “The Bill makes the case for a new covenant that will deliver a fairer deal for consumers and small businesses. The focus will be on making provisions to free mortgage prisoners across the UK, but it will also make the case for a new Financial Services Tribunal that will ensure small business borrowers can access justice and a fair hearing if they have a dispute with their lender. The Treasury needs to take responsibility. They have been selling Northern Rock’s loan book to vulture funds and should be lending a helping hand, rather than a Tin Ear.”
Mortgage prisoners are those that are trapped paying higher rates of interest to their borrower as they cannot meet the affordability tests, brought in after the financial crisis, despite making payments on their current, higher interest rate mortgage. It is particularly problematic for borrowers who have found their debt sold onto unregulated private equity firms, so-called ‘vulture funds’, that do not even offer new mortgages or more affordable rates. It is estimated that there are up to 200,000 mortgage prisoners in the UK today.
The FCA are consulting on proposals to help mortgage prisoners switch providers, but these proposals only give lenders the option to apply a modified assessment and would not be introduced as an obligation on lenders. UK Finance launched a voluntary agreement to support mortgage prisoners to switch to an alternative product at their present lender, but this does not help the approximately 120,000 customers with inactive lenders who have no hope of improving their situation as they cannot access better rates, even though they are in the situation through no fault of their own.
The FCA and the Treasury must do more. This Bill seeks to legislate so that these borrowers should be treated as grandfathered to enable them to bank to other lenders. Banks should be obliged to take people on and treat them as grandfathered – and the new mortgages should be permitted without regulatory penalty for the bank they move to. The practice of selling mortgage books to lenders who are unregulated and/or do not offer new business should be stopped.
The Bill also seeks to increase protections for small business owners. It will make provisions to prevent the foreclosure of loans under certain circumstances – including when the borrower has never missed a repayment – to prevent the unnecessary insolvencies of businesses in the UK. The Bill will also legislate for the introduction of a Financial Services Tribunal to fill the gap in accessing justice for businesses with a dispute resolution mechanism that has the investigatory powers required to resolve complex business banking disputes. To do so will ensure that we provide British businesses with justice and fair compensation when the fall victim to wrongdoing by the banks.