A tightening of the Consumer Credit Act and licensing procedures would bring second charge mortgages under an effective regulatory control, according to the National Consumer Council (NCC).
Along with the abolition of the upper limit of £25,000, the Council is pressing for three main changes to the system; a fines and points system, so those traders who are pulled up on a regular basis can automatically lose their credit license, an easy to use and free ombudsman service that could enforce compensation and make binding decisions and a stricter enforcement of license applications with on-going supervision.
An NCC spokeswoman said: ‘We want a situation where a first mortgage would be under the control of the Financial Services Authority (FSA) and a second charge mortgage, or any other form of credit, regardless of size would be covered by a reformed, and better than now, Consumer Credit Act.’
At the moment second charge mortgages will not fall under the FSA’s remit in 2004, leaving loans of over £25,000 completely unregulated.
Richard Hurst, communications manager at Future Mortgages, one of the UK’s largest second charge lenders, said: ‘Anything that makes for a more transparent situation across the market should be welcomed. In our opinion regulation in this market would be a good thing. We requested early on that all assured loans come under the FSA, so everyone knew where they stood, but were disappointed.’