New Clause 27 - Money laundering offences: electronic money institutions, payment institutions and deposit-taking bodies

Part of Financial Services Bill – in the House of Commons at 5:15 pm on 13th January 2021.

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Photo of Seema Malhotra Seema Malhotra Shadow Minister (Work and Pensions) (Employment) 5:15 pm, 13th January 2021

I support amendments 1, 2 and 8 and the remarks made by our Front-Bench team to oppose any post-Brexit race to the bottom in regulation. It is also vital that we move towards a deal on equivalence in financial services with the EU.

Financial regulation has to adapt to market innovations to ensure that consumers are well protected, and it is under this call for consumer protection that I also speak in support of new clauses 24 to 26. These push for a fair deal for the 250,000 mortgage prisoners stuck for 10 years paying high interest rates. The all-party parliamentary group on mortgage prisoners, which I co-chair, has been contacted by hundreds of mortgage prisoners, who describe the worry and the stress that comes from being trapped as they are. The Minister suggested that the SVRs paid by mortgage prisoners are just 0.4% higher than SVRs at other lenders. Our case studies, which include nurses, teachers, members of the armed forces and small businesspeople, tell another story.

It is inappropriate to compare the rates that borrowers with inactive lenders are currently paying with those paid by SVR customers at other active lenders. If mortgage prisoners were with an active lender and up to date with payments, they would have access to a product transfer giving them a lower fixed rate. I will illustrate this through two constituents. The first is with an active lender. Last year, when she contacted my office, she was paying an SVR of 4.14%, but as she was with an active lender, we were able to help make representations. She is now on a two-year fixed rate of 1.79%, and saving over £5,000 a year in mortgage payments.

The second constituent’s Northern Rock mortgage was sold to Landmark and is ultimately owned by Cerberus—a mortgage with a fully regulated high street bank sold off to a vulture fund. The family are not being offered any new deals, costing them over £6,000 a year more than if they were with an active lender. I cannot put into words the stress that this has caused the family, who have nearly lost their home more than once.

When the Government sold these loans to Cerberus, UK Asset Resolution told Lord McFall that returning these mortgages to the private sector would result in their being offered fixed rates. In a “Panorama” investigation two years ago, a UKAR spokesperson said that Cerberus had the ability to lend to former Northern Rock customers and that they had believed they intended to do so. They said:

“The reply to Lord McFall sent on behalf of the UKAR board of directors was based on information presented to UKAR and the board had no reason to disbelieve this at that time.”

If UKAR was misled by Cerberus, to date there have been no consequences, and today we have Landmark refusing to offer my constituent any fixed rates. Capping SVRs for mortgage prisoners is an issue of consumer protection.

I turn briefly to new clauses 24 and 26. Expanding the regulatory perimeter to help mortgage prisoners is supported by the APPG and the UK Mortgage Prisoners campaign group, and there is support from the Building Societies Association, which has said:

“It is essential that the FCA and the Government take action urgently to ensure that consumers whose mortgage is sold to an unregulated lender have robust consumer protections extending to interest rates.”

An expansion of the regulatory perimeter would give the FCA all the power it needs, in the words of the Governor of the Bank of England to the Treasury Committee in his appointment hearing, to “conclusively address” the question of mortgage prisoners. New clause 26 says that consumers would need to consent before their mortgage is sold on to an inactive lender. Supporting these amendments provides immediate help to mortgage prisoners who have suffered far too long and are now hit harder by the pandemic.