The CML argues in its response to the Treasury's consultation on home reversion plans, published today, that failure to regulate them could result in a skewed equity release market that disadvantages consumers, most of whom are elderly and some of whom may be vulnerable. This is a market that needs strong consumer protection, the CML believes.
The risk is that if home reversion schemes are left unregulated, it will leave a loophole when the rest of the equity release market is regulated by the FSA in October 2004. Reversions may appear to have a price advantage over lifetime mortgages and may become subject to less scrupulous selling techniques by unregulated sellers. This could mean they end up being sold to people who would be better served by a lifetime mortgage product. Given the huge impact that equity release can have on older people's finances, it is essential that the regulatory system does not distort their choices by inadvertently creating advantages for home reversion schemes over lifetime mortgages.
Jackie Bennett, CML Senior Policy Adviser, commented:
"Failure to regulate reversion schemes would cause confusion in the equity release market. It would also deny reversion scheme customers access to the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong. Given the sensitive nature of the equity release market, it is essential that the Treasury put in place robust consumer protection measures to bring reversion schemes into line with lifetime mortgages."
