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FSA to protect sale and rent back customers

FSA to protect sale and rent back customers

Category: Money

Updated: 03/06/2009
First Published: 03/06/2009

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The Financial Services Authority (FSA) has outlined the measures it is to introduce on 1 July to tackle the problems faced by customers in the sale and rent back (SRB) market.

The scheme allows people in financial difficulties or homeowners who have broken up with partners, for instance, to sell their home to a firm and rent the property back from them.

However, the programme has been criticised for undervaluing homes and not being properly regulated. A recent FSA survey found there was confusion about SRB, with 42 per cent of people seemingly unaware it was unregulated.

Furthermore, the majority of people thought they would be entitled to stay in their home for more than five years. In reality, the typical contract on a typical SRB agreement is between six and 12 months

An interim regime will be introduced soon, with 1 July set to be the start date. The new rules will address the biggest problems, as firms will have to prove they are run by fit and proper people, as well as complying with a number of business rules, including Principles for Business.

Firms without authorisation that wish to continue any new SRB activities will need to apply for permission.

Ed Harley, FSA head of mortgage policy, said: "We know that some customers enter into sales and rent back arrangements without understanding the costs and risks involved. This can be a real source of distress for people already in difficult circumstances.

"Firms entering our regime will need to run their business in a way that means customers are treated fairly."

A more comprehensive regime is scheduled to be installed on 30 July next year.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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