"Having two levels of regulation is causing real harm, and the confusion surrounding the regulatory perimeter only exacerbates this."
The letter also asks for clarification of the FCA's powers to help mortgage prisoners in unregulated firms or funds.
The FCA recently published data which found that around 250,000 people are in closed mortgage books or have mortgages owned by firms that are not regulated by the FCA.
The letter says: "We are often told that, whilst a fund may be unregulated, the administrator of that fund is regulated, and therefore has the same obligations to its customers. However, it is clear from our discussions regarding both commercial and mortgage lending, that this is not the case.
"It would be most helpful if you were able to set out for us what the key differences are and the practical implications for customers that are held by a 'normal' regulated lender and an unregulated fund. You also stated that the powers that the FCA currently has are insufficient to deal with unregulated funds, even when they are administered by a regulated entity. Unfortunately, we find that the fact that a fund is administered by a regulated entity obfuscates and confuses the true nature of the relationships."
Seema Malhotra commented: "Having two levels of regulation is causing real harm, and the confusion surrounding the regulatory perimeter only exacerbates this. It is critical that the government steps in to give the FCA the powers it needs to solve this problem once and for all. Too many have suffered for too long."
