Conservative MP Charlie Elphicke introduced his ten minute bill – a way for backbenchers to attempt to introduce legislation – named Banking (Consumer and Small Business Protection) yesterday.
The bill aims to help borrowers who are currently stuck in an uncompetitive deal, potentially with an inactive lender, to transfer to a new lender.
Elphicke’s bill would ban lenders from selling their mortgage books onto unregulated businesses.
Elphicke criticised the FCA and the Treasury for allowing Northern Rock’s old loan book to be sold to “vulture funds” without additional protection to ensure they do not end up on even more costly rates, but with little option of remortgaging.
He said: “It is wrong for the Treasury to have allowed borrowers to be placed in a worse position than would otherwise have been the case.”
Elphicke said that these borrowers took out their deals long before the current affordability rules were introduced, and have proven they can meet their repayments, yet they miss out on cheaper deals because of a “computer-driven affordability test that ignores the reality of the real world”.
He continued: “These borrowers should be treated as grandfathered as regards the later regulatory rules that came in. Banks should be obliged by the FCA to take people on and treat them as grandfathered, whether they are existing customers or not, and the new mortgages should be permitted without any regulatory penalty for the bank they move to.”
Ten minute bills are only likely to become legislation with the backing of the government. The bill will be read for a second time today, followed by a debate.