Financial Services and Markets Bill [Lords]

Seema Malhotra Excerpts

Tuesday 10th November 2026 Commons Chamber

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I, too, welcome this legislation and its goal of modernising consumer protection arrangements and making them fit for the digital age. I congratulate the Chancellor and the Economic Secretary to the Treasury on their work, and on their ongoing engagement with Members from across the House as the reforms proceed.

I am very pleased to see measures that enable credit unions to expand by widening access to membership. I have seen the challenges experienced over the years as a Labour and Co-op MP, and I have worked to increase access to credit unions for local people in Feltham and Heston. It has been a challenge, and I look forward to working with my hon. Friend the Member for Peterborough (Andrew Pakes) on these reforms and on making sure that they become a reality for our constituents. It is clear that if anything can focus our mind’s eye on how important this is, it is seeing the importance of household resilience and being able to plan financially, given the challenges that the cost of living crisis has brought.

It is important for us to think ahead and make sure that we do all we can to improve household resilience, and these reforms will help more than 200 credit unions across Great Britain to reach new communities, with millions of people having more access to affordable and community-based financial services. Credit unions are known and trusted by local communities, and trust is really important for giving people confidence about where to save, how to save and whom to trust. It is also vital that we take steps to protect access to in-person banking services for the future, and we look forward with anticipation to the publication of the access to banking review and the Government’s response.

I want to raise three matters that I believe need to be further addressed in the Bill, some of which have already been referred to: the proposed 10-year time limit on complaints, the referrals process, and the fair and reasonable test. Finally, I will mention mortgage prisoners, as discussed by the Liberal Democrats’ spokesperson, the hon. Member for Carshalton and Wallington (Bobby Dean)

First, on the 10-year time limit, the Government are putting forward a wide range of reforms to the Financial Ombudsman Service, but I am concerned that they are not being clear about the impacts on the public. The proposed 10-year time limit on Financial Ombudsman Service complaints risks locking thousands of consumers out of compensation. It can take years for people to realise that they have been ripped off, and firms often do everything they can to conceal misconduct.

[Dame Meg Hillier]

On that point, one of the issues is document retention. Firms do not necessarily keep information, so the process can rely on the consumer keeping it. Even if they can get redress from a firm, they may not have the documentation.

[Seema Malhotra]

I think we all agree with my hon. Friend’s important point.

I am concerned that the Government’s assessment appears to underestimate the true cost by assuming that historical cases are worth little more than average complaints, and by ignoring many complaints that firms will simply reject, without considering their merits, due to the application of the new time limit. I am very happy to share with the Minister more of my analysis of the implications and of what is in the impact assessment.

Secondly, the process of referral to the FCA could create a bureaucratic logjam, with firms incentivised to seek FCA rulings whenever a case looks likely to go against them, adding delay and administrative costs while allowing binding interpretations of the rules to be made without proper consultation. The referrals process should be reformed so that it is a rare occurrence, rather than the 1,000 to 3,000 referrals a year that the FCA expects will happen, which will cause delays as well as administrative costs and all the pain that that will entail. Proper consultation needs to be built in, so that the FCA gets full input from consumer groups before making binding decisions on what the new rules mean.

Thirdly, there are important questions about changes to the ombudsman’s fair and reasonable test, which could narrow the ability of the FOS to take account of industry codes and good practice, including protections that victims of economic and financial abuse rely on. If we want economic growth, we need consumers to save for retirement, take out insurance and engage confidently with long-term financial products. We need small businesses, like many of those across Feltham and Heston, to borrow and invest, and undermining trust in dispute resolution mechanisms risks undermining that confidence. Martin Lewis has warned that

“Restricting consumers’ access to free and fair redress is not a recipe for economic growth. Once consumers are warned about the erosion of their rights, it’s possible it will lead to disengagement from the financial services industry and diminishing trust.”

That is why we must look very closely at the proposals in order that we are confident that consumers will retain the necessary confidence in financial services.

Finally, in the last Parliament, the all-party parliamentary group on mortgage prisoners, which I co-chaired for a number of years following the experience of mortgage prisoners in Feltham and Heston, raised concerns that poor decision making at the FOS was leading to detriment for mortgage prisoners. In all honesty, no real progress was made. The situation is ongoing, as thousands of mortgage prisoners remain stuck and are suffering significant detriment. Many are still trapped on expensive variable rates with inactive lenders and are unable to switch to cheaper deals, so they are paying hundreds or thousands of pounds more each year and facing a far greater risk of losing their homes.

In 2024, the previous Prime Minister promised to get everyone around the table and ensure that this issue was properly addressed, but that has not yet happened. Mortgage prisoners remain trapped, and are paying higher interest rates to inactive lenders and vulture funds. They are told that they cannot pass affordability tests in order to pay less for their mortgage, and as the Bank of England increases interest rates following six cuts, there is nothing that vulnerable mortgage prisoners can do to gain any certainty on their payments. Many are former Northern Rock customers who are still experiencing severe harm because their loans were sold to inactive lenders by the previous Conservative Government. The London School of Economics report, funded by Martin Lewis, put forward solutions including improved access to financial advice, targeted equity loan schemes, and a Government-backed guarantee mechanism to help borrowers move back into the active market. I would be grateful to hear when the Government plan to respond in full to the proposals in the LSE report, and I would also be grateful for a meeting to discuss what more the Government can do to help mortgage prisoners.

I very much look forward to the Minister’s response and to working with colleagues from across the House on these reforms to make sure that, together, we can ensure the leadership and the fairness of our financial services sector, which is so renowned across the world.

[Several hon. Members rose—]