All equity release firms are being encouraged to adopt the language outlined in the guide
The Equity Release Council has created a new guide to help consumers better understand and compare fees and charges across different equity release products.
The guide sets out a consistent way of describing fees and charges throughout the customer journey using standardised language that is meant to be easy to understand. Its content has been generated by a working group made up of council members, including advisers, providers, and legal experts.
All equity release firms are being encouraged to adopt the language outlined in the guide when describing fees and charges, to make it easier for consumers to compare products and their associated costs.
The guide outlines the recommended language for all fees and charges, though not all customers will be subject to every charge listed when taking out an equity release product. The guide will also be available to consumers online through the council’s website.
The aim of the guidance is to support better consumer understanding which is one of the key objectives of the Financial Conduct Authority (FCA)’s Consumer Duty. The guidance also takes account of the recommendations of the Financial Services Consumer Panel, which calls for standardised disclosures of fees and charges.
Current FCA rules require all fees and costs to be clearly outlined to customers before and during the application process. Council standards also ensure all customers receive independent legal advice, alongside regulated financial advice, to ensure they understand the costs, risks, and benefits associated with equity release.
Some 90,000 consumers took out £6.2 billion in 2022 via council members, each backed by robust safeguards that ensure rates are fixed or capped for life at the point of withdrawal without ever facing the risk of repossession.
Since March 2022, all new customers who took out plans that meet the council’s standards can make voluntary penalty-free repayments, which can prevent the interest from compounding and enable people to pay down the capital.
“When people take out any new financial services product, such as equity release, they often face a few unfamiliar terms and definitions,” Jim Boyd (pictured), chief executive at the Equity Release Council, commented. “Each firm often uses slightly different language which makes it harder for consumers to quickly identify how product fees differ and can be challenging when comparing costs.
“The council’s guidance describes all the fees and charges that could be relevant to an equity release application, depending on its complexity.”
Boyd added that the aim is to establish a set of standard definitions to help consumers to understand their options as they explore the equity release process with a regulated adviser.
“We understand adopting changes takes time, but the arrival of the Consumer Duty is a chance for industry to take stock and move towards a standardised approach,” he said. “We hope all firms will take this guidance on board when they next revisit their approach, so it becomes the standard across the equity release market.”
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