Tighter regulation for sale-and-rent back schemes

Published 29th Sep 2009

Companies will be banned from using high-pressure sales techniques and emotive language


Companies offering controversial sale-and-rent back schemes will be banned from using "exploitative advertising" and high-pressure sales techniques, under plans announced today.

The Financial Services Authority (FSA), the City regulator, has proposed that from next June the companies will be barred from cold calling consumers or dropping promotional leaflets through letter boxes. They will also be prohibited from using emotive terms like "fast sale", "mortgage rescue" and "cash quickly" in promotional literature.

The proposals come after the Office of Fair Trading (OFT) warned last year that sale-and-rent back deals, which involve individuals selling their home at a discount and renting the property for a set period, could cause “serious harm” to vulnerable homeowners.

They build on the FSA’s interim regulation of the sector, which was introduced at the end of June and gave customers access to the Financial Ombudsman Service if things go wrong.

The rapidly growing sector has come in for heavy criticism from consumer groups amid claims that some companies pay less than 60 per cent of the market value for properties, while others levy steep rent increases and some evict people after just 12 months.

The new rules demand that companies offer security of tenure, making it clear how long customers will be able to stay in their homes. Companies will also be required to give customers a cooling-off period, in which they can change their mind, and check that a consumer can afford a deal and it is right for them.

Ed Harley, head of mortgage policy at the FSA, 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.”

Source: ' Times '

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