Andrea Rozario, Director General, SHIP (Safe Home Income Plans), the equity release trade body, said: “This is a natural step to protect consumers as economic conditions worsen and more people need to release equity from their homes.
“SHIP has publicly argued for Government adoption of regulation on SARB over the past year as it is essential that people are aware of all of their options and the risks associated with whichever path they choose.
“SHIP’s main concern over sale and rentback has primarily been over the lack of information given to customers about the risks associated with the industry. This new regulation addresses this issue as providers will be required to be clear about the risks involved. Ultimately people need choice but they need to make informed decisions after consideration of all of their options.”
Claire Barker, chairman, ERSA commented: “Regulation is a very positive move for the sale and rent back sector, which needs to be cleaned up before more vulnerable people sign up to deals that they do not fully understand.
“It is imperative if this is to become a mainstream product that homeowners have the same rights of redress as they do for other financial products, such as equity release.”
The Financial Services Authority (FSA) has today published the details of the regime that it aims to introduce on 1 July to tackle immediate problems for customers in the sale and rent back (SRB) market.
The FSA is taking a two stage approach to regulating the SRB market. An interim regime will be brought in as soon as any statutory changes come into force (expected on 1 July) in order to address the most immediate problems for consumers, followed by a more comprehensive regime which will start on 30 June 2010.
Under the interim regime firms will need to meet FSA threshold conditions including the requirement to have adequate resources and to be run by fit and proper people. Firms will also have to comply with the Principles for Businesses and meet a number of systems and controls and conduct of business rules.
Firms that are currently unauthorised and that intend to carry on any of the new SRB regulated activities after the commencement of the interim regime will need to apply for interim permission. Similarly, firms that are currently authorised for other activities will need to apply for interim variation of permission. Firms are encouraged to start preparing now for authorisation and to apply as soon as the interim regime starts.
