The sale and rent back market has emerged from an unregulated market where there was a perception that some consumers were entering into agreements with little protection into a much more regulated market.
In a trend that has been continuing for months additional regulation has been put in place by the FSA which comes into effect on the 30th June.
From that date sale and rent back customers will be better protected from firms or lenders using aggressive or unfair methods. Some of the full protections include:
– Banning of exploitative advertising and high-pressure sales techniques
– Prohibiting the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature;
– A 14-day cooling-off period to give consumers more time to make decisions on sale and rent back;
– Banning of cold calling and prohibiting firms from dropping promotional leaflets through letter boxes;
– Security of tenure for customers for a minimum of five years;
Measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process
The CML welcomes the additional protection that the new regime will put in place for consumers, and especially the clampdown on emotive advertising. The five-year-minimum security of tenure will help to prevent short-term exploitative acquisitions by unscrupulous companies, and the 14-day cooling-off period is also a helpful intervention in this particular part of the market, where consumers may be vulnerable and at risk of making poor upfront decisions.
Lesley Titcomb, FSA director responsible for the mortgage sector, said:
"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter controls were vital. Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.
"We also think it is wrong that arrears charges should be taken from customers already in difficult circumstances and trying to get their finances back on track. Today’s rules make absolutely clear the standards we expect of firms, and we have already taken tough action against some of the worst offenders."
The measures announced today will also require that all mortgage sales staff have to be FSA approved or face a penalty and all firms active in the sale and rent back market must be authorised or face potential fines. The FSA is proactively monitoring the SRB market for unauthorised activity, and will take action if necessary.
Not being treated fairly or having all the facts can be a source of real distress for people in already difficult circumstances.
We wonder how many misselling opportunities will arise in the market for litigators in future.