FCA starts debate on fairness of changes to mortgage contracts

Consumers and firms are to be asked for their views on how fairness should be assessed when lenders make changes to the terms of mortgage contracts and whether the Financial Conduct Authority (FCA) needs to make changes to its rules or guidance.

In a discussion paper published today, the FCA sets out some of the factors that are considered relevant when assessing changes to mortgages contracts and asks for views on its current approach to fairness.

Clive Adamson, director of supervision at the FCA, said:

'Consumers have a right to be treated fairly if their lender changes a term of their mortgage contract. It isn't always clear though to consumers how lenders and the FCA assess fairness in this area. This paper gives an opportunity for firms and consumers to give their views on what fairness means when changes are made in the terms of this very important financial product.'

As well as inviting discussion about the operation of the current regulatory framework, the FCA has also outlined three options for potential further action. These are:

  • taking no further action with the discussion paper and subsequent feedback statement providing clarity and transparency about the FCA approach to fairness;   
  • providing further guidance on current rules but making no changes to the current regulatory framework;
  • introducing new rules for example around the information that firms must provide to a consumer or restricting the changes that a lender could apply to mortgage contracts.

This debate will also form part of the wider work the FCA is undertaking to understand consumer expectations and how the industry can better meet the information needs of consumers.

The FCA is keen to engage with both the mortgage industry and consumers during the discussion period. Interested parties can send their views directly to the FCA.  The FCA intends to have face-to-face meetings with consumer groups, firms and trade bodies.

Notes for editors

  1. Discussion paper: Fairness of changes to mortgage contracts.
  2. On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  3. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  4. Find out more information about the FCA.