The FSA introduced full regulation of the market in June 2010 but firms were only regulated if rent-back was their main business.
But in its quarterly consultation paper, the FSA says it is concerned that a considerable number of unregulated rent-back transactions are happening.
It believes some small firms and individual investors who are active as rent-back providers are avoiding regulatory requirements because they claim they are not carrying on rent-back activities ‘by-way-of-business’.
It is seeking to change the ‘by-way-of-business’ test for agreement providers entering into rent-back transactions, so that even entering into one transaction will be treated as being carried out ‘by-way-of-business’, unless it is carried out by a family member.
In ts consultation paper it also reveals that it has decided against reviewing the current exam standards for mortgages.
It says: “Due to our ongoing Mortgage Market Review, we have taken the decision to postpone the review of examinations standards in this area so we can take into account any changes required by the MMR.
“Therefore, this consultation only proposes a review of the examination standards for undertaking pension transfer activity and managing investments.”