Last week the FSA published a consultation paper setting out its proposal for sale and rent back regulation.
The FSA is proposing a two-stage process with an interim regime being brought in from July this year followed by a full regime most likely to be delivered in the second quarter of 2010.
Alison Beeston, compliance and communications manager at Bridgewater Equity Release, says: “Bridgewater cautiously welcomes the FSA’s consultation paper and its proposals for regulating sale and rent back schemes, following last year’s Office of Fair Trading report into the sector and its recommendations for statutory regulation.
“It is interesting to see the FSA fast-track its regulation of sale and rent back by introducing an interim regime. It has always been our concern that the less ethical providers of these schemes remain unregulated, increasing the chance of significant consumer detriment and so damaging the reputation of those providing other forms of home finance.
She says increasingly, sale and rent back schemes have been marketed as ‘equity release’ products misleading the customer so it is therefore imperative that controls are put in place to protect the consumer.
She says: “FSA regulation of the sector will afford the consumer more clarity of information about the sale and rent back products and the important protections that regulation brings.
“It is suggested that a significant number of customers have already been mis-led into sale and rent back schemes only to find that the ‘rights’ they thought they had as tenants have not been in place.
“Regulation, even a watered-down interim version, should begin the process of weeding out the unsuitable providers of these schemes. This together with the tighter supply of funding should mean that the consumer will have access to safer sale and rent back products through committed ethical providers very soon.”
She adds: “Even with a number of government initiatives designed to help those facing financial difficulty, there may be an increase in the number of potentially vulnerable customers interested in these schemes so it is vitally important that this move to regulation of sale and rent back continues quickly and smoothly.”