The Mortgage Code Compliance Board has warned that without Ombudsman powers to rule on transitional consumer complaints, millions of existing borrowers will be left unprotected when FSA regulation comes into effect.
In response to the Treasury's consultation paper on transitioning complaints, the MCCB says that unless there is a change in the law, customers with complaints about mortgages purchased before Mortgage Day, but not raised until after statutory regulation begins, will have no mechanism for independent review if the complaint is unresolved through the Financial Ombudsman Service's internal complaints process.
The MCCB says this would leave a large gap in consumer protection which would potentially affect millions of mortgage borrowers.
At present complaints about products bought from firms who have registered with MCCB or the General Insurance Standards Council are dealt with under independent redress arrangements set up by these bodies. After statutory regulation comes into effect, complaints about products will be dealt with under the compulsory jurisdiction of the FOS.
Luke March, chief executive of the MCCB says: “The FOS' remit should include complaints about mortgages taken out under the Code which arise after Mortgage Day. The Treasury is consulting on this and we need a positive response from the industry and from consumer bodies. A significant flaw in the handover of regulation to the FSA could leave literally millions of mortgage borrowers with no right of redress.”
The MCCB believes that in order to achieve the seamless transition sought by both the Treasury and the FSA, it is imperative that provisions are made to ensure that transitional complaints have a forum for determination. In the MCCB's view, the 'do nothing' option is not an appropriate response for either the Treasury or the mortgage industry.