FSA shows its teeth with probe of rent-back firm
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The Financial Services Authority is already investigating a sale-and-rent-back firm for bad practices and misconduct, less than a year after regulating the sector.
Replying to a Freedom of Information request from Mortgage Strategy, an FSA spokeswoman says: “I can confirm that the FSA currently has one enforcement investigation into an authorised firm for rent-back bad practices and related misconduct.”
The FSA adopted a two-stage approach to regulating the rent-back market.
It implemented an interim regime from July 1 2009 and full regulation of the sector in June 2010.
The regulator says it cannot confirm how many companies are currently regulated to carry out rent-back activities.
As part of its regulation of the sector it banned exploitative advertising, cold calling and high-pressure sales techniques. It also introduced a 14-day cooling-off period.
Richard Farr, director of Telos Solutions, says that there has been a lot of criticism of the regulator for letting malpractice or potential malpractice go uninvestigated for a long time, so its clampdown should be commended.
He says: “In one respect you could say the industry should be applauding the FSA for setting the bar so high with stringent measures and for enforcing them quickly. At least everybody knows where they stand.
“If there is anybody with bad intentions the FSA is getting them out of the way.”
He adds that the sector was rife with bad practices before the regulator authorised it and it still remains a controversial part of the financial services market.
In February Which? Money re-vealed that it had reported two rent-back firms to the FSA after uncovering what it called woefully inadequate advice in the sector.
An investigation by the consumer watchdog that consulted 17 advisers from nine companies found just two offering acceptable advice.
Causes for concern raised by Which? included an adviser who gave a quote that would not have left the clients enough money to pay off their debts and another who did not ask the size of the customer’s debts.
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