FSA proposes significant strengthening of protections for sale and rent back customers

The Financial Services Authority (FSA) today set out a package of measures aimed at protecting vulnerable consumers in the sale and rent back (SRB) market.

Exploitative advertising and high-pressure sales techniques will be banned under the new proposals, due to come into effect on 30 June 2010, which builds on the FSA's interim regulation which started on 1 July 2009.

The new proposals include:

• a cooling-off period to give consumers more time to make  decisions;   
• banning cold calling and prohibiting firms from dropping promotional leaflets through letter boxes;
• prohibiting the use of emotive terms like 'fast sale', ' mortgage rescue' and 'cash quickly' in promotional literature;  
• ensuring consumers have security of tenure; and
• a requirement that in every sale firms check that the consumer can afford the deal and it is right for them.

Ed Harley, FSA head of mortgage policy, said:

"Sale and rent back can be the right solution for some consumers, but many of the people typically targeted are financially vulnerable and have been badly hit by the experience.  The FSA's proposed new rules will help to protect consumers.  We want to prevent high-pressure and inappropriate sales, and help consumers understand sale and rent back products, so they only enter into sale and rent back where it is an appropriate and sustainable solution for them."

The proposed expanded regime is designed to ensure an SRB market where:

• firms are fit and proper and appropriately resourced;
• firms' staff are competent to carry out their role;
• consumers get clear, concise and consistent information about a firm's services and products so they can make informed choices;
• consumers have time to consider the nature of the product and possible alternatives and to seek advice to help them reach a decision; 
• consumers are sold suitable products that take account of their circumstances,  needs, and affordability; and
• if things go wrong, consumers have appropriate protection.

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

Consumers should ensure that they only deal with authorised firms and be aware of the risks involved in sale and rent back schemes.  Normally they will be paid less than the full market value for their home and may not be able to stay as a tenant in the home in the long term.

More information about SRB schemes can be found on the FSA's Moneymadeclear Website.

CP 09/22 will be open for responses until 30 November 2009.

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