The Financial Services Authority (FSA) has today published new rules and guidance which are intended to 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.
Today’s publication contains details of the full regime, which will provide consumers with greater protection from 30 June 2010.
In particular, the FSA has:
o 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;
o introduced a 14 day cooling-off period to give consumers more time to make decisions on sale and rent back;
o banned cold calling and prohibited firms from dropping promotional leaflets through letter boxes;
o confirmed rules to ensure consumers have a security of tenure for a minimum of five years;
o introduced an affordability and appropriateness check across all sales to check that the sale and rent back deal is right for the consumer; and
o put in place measures 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.”
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.
By Andy Stern
© Property Owners Directory 2010
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