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30 | Equity release
entrants will be allowed until full regulation
SHIP has published the following list of matter what the Sale and Rentback
comes into effect next year, except those who
Do's and Don't for any of your clients
are applying for a variation of permission.
considering Sale and Rentback circle6
company tells you.
Don't forget to check if you are eligible
Bug-bears Essential and non-costly
for any state benefits or grants from the
Department of Work and Pensions and
One of the major bug-bears with the SRB
activities
providers has been their tendency to badge
circle6
your local council.
Don't assume everything you are being
their offerings as a form of 'equity release'. This Do:
is a key reason why the industry was particular- circle6
told is correct, get it checked out and
If you have an existing loan, speak with don't rush into any agreements.
ly vocal in calling for SRB regulation as without your lender if you are having problems
it consumers were being mis-led about the
products themselves and what exactly they circle6
meeting your monthly repayment.
If you are having trouble with debt
Costly but important activities
were signing up for. Many have opted for SRB speak with an organisation such as the
Speak with a qualified financial adviser
schemes thinking they had significant 'long- Citizens Advice Bureau (CAB), Payplan
who will discus
term' tenancy rights only to find this was not or the National Debt Helpline before
circle6
s your options with you.
the case. With interim regulation comes rules
circle6
Get independent legal advice.
Get an independent valuation of your
surrounding financial promotions and compa- circle6
you do anything else.
If feasible do consult your family about
property arranged by you – the
nies providing SRB products will have to run
valuation of the Sale and Rentback
their businesses by the rules – this again should circle6
your intentions.
Check out the company you are thinking
company may not be accurate.
knock out of the market the misleading web- of using. Are they regulated by the
sites and adverts that currently exist. Financial Services Authority (FSA)? If
Explore the alternatives
With regard to short-term tenancy agree- not, you may not have rights to redress
Consider other alternatives such as
ments, a problem for those consumers who if things go wrong and you could end up
trading down, family help, renting a room
were led to expect lifelong tenancy with their
scheme, the Treasury definition of SRB does circle6
evicted if the companygoes bust.
or any savings or policies you could use
Check the type of tenancy agreement
allow them. One might wonder whether the you are being offered. Many sale and
circle6
first.
If you are aged over 55 and looking to
problem might therefore remain under regula- rent back schemes offer very little
release equity from your property then
tion. The FSA is attempting to address this security. You are better off with a
consider the safer option of regulated
within its financial promotions and pre-disclo- lifetime lease (or a minimum of 21
plans offered by SHIP members. All
sure rules which should ensure that full infor- years) as opposed to an assured short
SHIP members are regulated by the
mation is given to the consumer to make them hold tenancy agreement which will offer
FSA and have extra safeguards above
aware they will only have a short-term agree- no security of tenure and may result in
the regulatory requirements to give you
ment; they must also be provided with full a higher rent being charged at the end
additional protection. protect their
transparent information with regard to when of the initial 6 months, or worse
families and to safeguard their future
and how the rental charges may change. eviction.
wealth? My own instinct is that it does.
Although there is no requirement for a Key
Today in the UK, it is still easier to
Facts Illustration at this stage, the pre-sale dis-
Don't:
closure requirements do include the need to
circle6
obtain credit than to buy an ISA or
Forget to think about your future
pension - and it is long over due that
inform the customer about the minimum peri-
financial, family and life plans along
action was taken to reverse this state of
od of their contractual right to stay in the
property.
circle6
with any ongoing commitments.
affairs. Secondly, given our
Don't be pressurised - if in difficulty
commitment to raise standards and to
with debt, speak with the companies
treat customers fairly, I believe it is
Consumers
you owe money to sooner rather than
essential that a statute of limitations be
Protection for consumers is of course vital and
the FSA consultation addresses a number of
circle6
later.
established for the advice profession.
Don't forget that the monthly rent is a
Our position is clear: we fully
issues which unregulated SRB schemes have
commitment you may not be able to
acknowledge the FSA's need to protect
thrown up. Firstly, consumers will have access
keep up, and that the amount of rent is
consumers, but we believe there is an
to the Financial Ombudsman Scheme under
likely to increase in the future. There is
important balance to be struck between
the interim regulation, providing the rights to
no guarantee you will get housing
the interests of consumers and the
redress that other regulated sectors provide.
benefit to cover this rental cost, no
advice profession.
Also, in the past, sale and rent back agreements
could be put in place with lightning speed, regulated firms will need to pay due regard to debt management tool, for example, govern-
offering the consumer little time to actually the interests of their customers and treat them ment support, an SRB adviser will need to be
consider what they were signing up to; the fairly. able to demonstrate competence and therefore
requirement for an independent valuation on knowledge of all the alternative options.
the property will probably put a stop to the '48 Competance All in all, the interim regulation coupled
hour' SRB. Finally, for advisers looking to provide advice with the ever-apparent tighter supply of fund-
Interestingly, there is no requirement for the on SRB schemes there will be no examination ing means that the consumer will soon have
customer to have an independent solicitor even requirement, probably because at this time access to safer SRB schemes provided by com-
though the FSA do recognise that the OFT there is no specific exam related to the product mitted ethical providers. Regulation will also
report found evidence of high-pressured sales and the short timescales associated with inter- afford consumers much greater protection and
tactics. In this instance, the FSA seem to be im regulation. However, in order to be able to the horror stories that have accompanied the
relying on the Principle that firms must act discount the possible alternatives to an SRB sale of these products will hopefully be a thing
reasonably in their dealings with customers – such as a mortgage, equity release plan or other of the past.
March 2009 Mortgage Introducer
www.mortgageintroducer.com
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