New home "sale and rent back" measures

FSA introduces new protection scheme for vulnerable home owners

The Financial Services Authority (FSA) has published new rules and guidance which put in place a strong framework of consumer protection for vulnerable consumers in the "sale and rent back" (SRB) market.

The FSA adopted a two-stage approach to regulating the "sale and rent back" market.  To tackle the most immediate sale and rent back issues for consumers as quickly as possible, it implemented an interim regime from 1st July 2009.

Its new publication contains details of the full regime which is intended to provide consumers with greater protection from 30th June 2010.

In particular, the FSA has:

• banned exploitative advertising and high-pressure sales techniques and prohibited the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature;
• introduced a 14 day cooling-off period to give consumers more time to make decisions on sale and rent back;
• banned cold calling and prohibited firms from dropping promotional leaflets through letter boxes;
• confirmed rules to ensure consumers have a security of tenure for a minimum of five years;
• introduced an affordability and appropriateness check across all sales to check that the sale and rent back deal is right for the consumer; and
• put in place measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process.

All firms active in the sale and rent back market must be authorised otherwise they face potential fines or imprisonment. The FSA is proactively monitoring the SRB market for unauthorised activity, and will take action if necessary.

Date Added: 1st February 2010