A gap in the regulation of mortgage lenders should be closed to give more complete protection to consumers, an industry panel has said. Laura Slatteryreports.

The Financial Services Consultative Industry Panel welcomed the introduction of the financial regulator's consumer protection code, but said more work was needed to ensure a common standard of protection was in place for all types of financial products and providers.

James Deeny, the panel's chairman, said that while mortgage intermediaries required authorisation, no comparable requirements existed for firms that wished to act as mortgage lenders but were not deposit-taking firms.

"The financial regulator is not in a position to apply the code to such providers, and their consumers may not avail of the protections set out therein."

The gap could affect older people who take out lifetime mortgages, sometimes called equity-release loans, and people with poor or no credit history who take out so-called "sub-prime" loans directly from specialist companies. If these companies are not acting as intermediaries and are not authorised to take deposits, they are not regulated by the financial regulator, although they are subject to the provisions of the Consumer Credit Act.

The industry panel urged the financial regulator and the Department of Finance to close the gap in regulation to ensure that consumer protection is consistent across the industry.

The industry panel, which was set up alongside a consumer panel to liaise with the financial regulator, published its 2006 annual report yesterday.

The panel welcomed the regulator's efforts to promote its approach to regulation in New York.

The panel also said that similar exercises should take place in other major financial centres such as London and Paris.