Consumer groups and IFAs are attacking the Government for quietly dropping proposals to prevent mortgage lenders from penalising borrowers with compulsory insurances.
In a White Paper in 1999, Trade Secretary Stephen Byers pledged to shake up the existing system so that lenders could no longer handcuff mortgages to mandatory protection products.
But the bill was a surprising omission in last month's Queen's Speech, sparking fears that lenders will continue to act with impunity.
Consumer groups have reacted angrily to the U-turn, with the Consumers' Association branding it a “betrayal of consumer interests”.
The DTI says, since Byer's announcement on the issue, lenders have acted to clean up such practices, with only 5 per cent of mortgages currently on the market dem anding a compulsory insurance tie-in.
But fears have been raised that lenders only changed these practices to prepare for incoming legislation which will not now arrive, leaving borrowers again open to further exploitation.
Pretty Technical Partnership partner Kim North says: “Compulsory tie-ins for the purchase of any product should be dropped. It is a sad day for the consumer and lenders can now do as they wish.”
National Consumer Council director Anna Bradley says: “This is a real disappointment. Although the Government plans to achieve its objectives in different ways, real problems remain that only tough new laws can address.”