Many of the comments the Treasury received about how it proposed to bring the second charge market in line with the mortgage regulatory regime were focussed on the Financial Conduct Authority’s (FCA) rules and not on the high level change which it will oversee.
But the government did confirm it intended to allow the current exempt products to second charge loan regulation to remain unregulated. Second charge business loans of over £25,000 will remain exempt but the government said it was an area which it would keep under review and would ‘consider taking action if evidence of detriment emerges’.
The Treasury’s response also acknowledged calls for the back book of second charge loans to have their Consumer Credit Act (CCA) protections removed. The respondents argued that keeping these protections in place after March 2016, when MCOB protections would take over, ‘drove complexity and cost’. They said the mortgage regime would provide ‘adequate’ protections to replace those lost in the move.
The Treasury’s response to the request read: “While we understand the argument that MCOB provides strong protections for loans originated under the CCA and believe that this justifies the decision not to adopt these protections for new second charge loans written under the MCOB regime, taking such protections away from customers who have already entered into a loan agreement does not seem reasonable.”
The FCA plans to publish its rules on second charge mortgage lending and brokering under the MCD towards the end of quarter one.
The final draft of legislation produced by the Treasury will be put before the House of Commons and the House of Lords for approval.
The MCD must be implemented into UK law by 21 March 2016.