Millions of borrowers will be left unprotected when FSA regulation comes into effect.
In response to the Treasury's consultation paper on complaints the MCCB warns that unless there is a change in the law, customers with complaints about mortgages purchased before Mortgage Day but not raised until after regulation begins will have no mechanism for independent review, if the complaint is unresolved through the Financial Ombudsman Service's own complaints process.
The MCCB says this would leave a gap in consumer protection which could potentially affect millions of mortgage borrowers.
Complaints are currently dealt with under independent redress arrangements set up by the MCCB and the General Insurance Standards Council. After statutory regulation they will be dealt with under 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 consumer bodies. A significant flaw in the handover of regulation to the FSA could leave millions of mortgage borrowers with no right of redress.”
The MCCB believes it is imperative that provisions are made to ensure transitional complaints have a forum for determination in order to achieve seamless transition. In the MCCB's view, the 'do nothing' option is not an appropriate response either for the Treasury or the mortgage industry.
Alison Hoyland, spokesperson for the FOS, says: “We welcome these proposals. So far, we've had about 200 firms joining our introductory programme which enables brokers to start learning how the FOS works. That's an encouraging take-up.”