The Financial Services Authority has published new rules and guidance which put in place a strong framework of consumer protection for vulnerable consumers in the sale and rent back (SRB) market.
The FSA adopted a two-stage approach to regulating the sale and rent back market. To tackle the most immediate sale and rent back issues for consumers as quickly as possible, it implemented an interim regime from 1 July 2009. The full regime starts on 30 June 2010.
In particular, the FSA has banned exploitative advertising and high-pressure sales techniques and prohibited the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature.
There will be a 14-day cooling-off period to give consumers more time to make decisions on sale and rent back. Cold calling is banned and firms are prohibited from dropping promotional leaflets through letter boxes.
The FSA has confirmed rules to ensure consumers have a security of tenure for a minimum of five years. It has introduced an affordability and appropriateness check across all sales to check that the sale and rent back deal is right for the consumer. And finally, measures have been put in place to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process.
Ed Harley, FSA head of mortgage policy, said: “For some people in financial difficulty, staying in their home remains very important. Selling their home and renting it back in this way can be right for them. But we are aware of some firms exploiting vulnerable consumers at a difficult time. So, it is right that we introduce these further protections, and we will take swift action where they are not met.”
The FSA has also published proposals for the data it will expect firms to supply for use in the supervision of sale and rent back firms.
All firms active in the sale and rent back market must be authorised otherwise they face potential fines or imprisonment. The FSA is proactively monitoring the SRB market for unauthorised activity, and will take action if necessary.
Consumers should ensure that they only deal with authorised firms and be aware of the risks involved in sale and rent back schemes. If anyone is aware of sale and rent back firms who continue to trade without being authorised they should call 0300 500 5000 immediately.
Date: 29th, January, 2010
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