FSA cracks down on unscrupulous lenders

Published 25th Jun 2010

Homeowners who are in mortgage arrears or who take out sale and rent back agreements will be better protected, thanks to new rules from the Financial Services Authority.

The financial watchdog today announced it will put new measures in place from 30 June to protect vulnerable homeowners who fall victim to 'unscrupulous' sale and rent back companies or who find themselves in financial difficulties.

The FSA also said it plans to make all mortgage advisers personally accountable for their actions.

As of next week, mortgage providers must not apply a monthly arrears charge where an agreement is already in place to repay the arrears.

Payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later.

And firms must consider all options for borrowers. It also adds that repossessions should always be the last resort.

The crackdown on sale and rent back firms comes after a raft of complaints from consumers. The firms, which prey on customers who face repossession or are in need of cash quickly, have been criticised for using misleading advertising.

The have been slammed for providing low valuations on properties and offering extremely short-term tenancy agreements.

The FSA's new measures will mean sale and rent back firms will be prevented from using aggressive or unfair sales methods.

Exploitative advertising, cold-calling and high-pressure sales techniques will be banned, and a 14-day cooling-off period will be introduced. What's more, the security of tenure for customers will be set at a five-year minimum.

Lesley Titcomb, FSA director responsible for the mortgage sector, said: 'Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.'

'Today's rules make absolutely clear the standards we expect of firms, and we have already taken tough action against some of the worst offenders.'

The new rules will also require all mortgage sales staff, and firms active in the sale and rent market, to be FSA approved or face a penalty.

They will be required to demonstrate they are 'fit and proper', helping to prevent mortgage fraud and enabling the FSA to monitor individuals in the mortgage market.

Source: ' Daily Mail '

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