Clampdown on sale and rent back welcomed

1 February 2010

a house

Shelter has welcomed new measures published by the Financial Services Authority (FSA) to protect vulnerable consumers in the sale and rent back market.

‘Sale and rent back’ or ‘mortgage rescue’ companies offer struggling homeowners the chance to stay in their homes when they can no longer afford their mortgage. The property is bought and rented back to them by the company.

Before the FSA began regulation of the sector in July 2009, some companies took advantage of people’s desperate circumstances by buying properties at much less than their market value, putting up rents to unreasonable levels or even evicting tenants from their own home for no reason.

The new regulations will come into effect from 30 June 2010, and include:

  • the banning of exploitative advertising, high-pressure sales techniques and the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature,
  • a 14 day ‘cooling-off’ period to give consumers more time to make decisions,
  • firms are barred from cold calling and dropping promotional leaflets through letter boxes,
  • rules to ensure consumers have a security of tenure for a minimum of five years,
  • an affordability and ‘appropriateness’ check on all sales to ensure that the sale and rent back deal is right for the consumer.

Shelter chief executive Campbell Robb said: ‘Shelter highlighted the existence of unscrupulous sale and rent back firms over three years ago which led to last years' interim regulation of the industry.

‘We are now very pleased to see that the FSA are cracking down further on the underhand tactics used by many in the industry. We will continue to highlight instances where these new rules are being ignored so that enforcement action can be taken.’

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