In the report the OFT recommend statutory regulation by the Financial Services Authority (FSA) for the Sale & Rent Back sector with increased consumer protection. The report outlines a number of key details regulation should cover including ‘an obligation on sale and rent back firms to be more transparent about the initial valuation and sale price, the terms of the tenancy and the amount of rent to be paid’. Also regulation should include a ‘requirement on firms to tell consumers about the free, independent advice available to them before they decide to sell’.
Commenting on the study and its recommendations, Alison Beeston, Compliance & Communications Manager at Bridgewater Equity Release, said: “Our initial response to the OFT study into Sale & Rent Back is positive. As a provider of regulated home reversion products, we raised concerns about these unregulated schemes 18 months ago. Therefore, it is pleasing to see that the OFT has now investigated the sector and concluded that, due to the fragmented nature of the market, Sale & Rent Back products should be regulated by the FSA. Given that many firms market these products as a form of ‘equity release’ it is important that the sector is regulated alongside home reversions and lifetime mortgages, and that customers are made aware of the differences between the products.
“As it stands, consumers have little protection with unregulated Sale & Rent Back products and the study has shown that many individuals are entering into these schemes when it is not the best option for them. The study also highlights a number of failings with some of the schemes available, notably consumers are not being given sufficient information up front, they are not being provided with alternatives, and they are potentially being mis-led that they have security of tenure in the long-term when this is not the case.
“For these reasons, and the fact that these products can be extremely damaging to vulnerable consumers, it is vitally important that the process of statutory regulation moves quickly. In this way we can set firm rules for the firms selling these products and ensure transparent information and sufficient protection is passed to consumers.”
