Sale and rent back schemes to have tighter regulation.

The Financial Services Authority (FSA) has announced new sale and rent back measures to reinforce their interim regulations launched on 1st July. The measures, designed to protect consumers in this previously unregulated market come into effect next June. The proposals include banning cold calling, and introducing a cooling-off period to give consumers more time to make decisions. Firms will no longer be allowed to drop promotional leaflets through letterboxes, or be allowed to use terms such as “mortgage rescue” or “cash quickly” in their literature. Firms will also be required to check that the customer can afford the deal and that the advice is suitable. Sale and rent back schemes buy property but allow the homeowner to continue living there as a tenant, usually on an assured shorthold tenancy lasting 6 to 12 months. The schemes are often targeted at vulnerable homeowners facing financial difficulties or repossession, but the purchase price can fall well short of the market valuation. Some homeowners have even found themselves facing eviction when the new owner wants to sell or fails to keep up their mortgage repayments. The expanded measures are designed to ensure consumers get clear and consistent information about a firm's services, and are sold suitable products that take account of their circumstances, needs, and affordability. If things go wrong the measures should ensure consumers have the appropriate protection. Ed Harley, FSA head of mortgage policy, said "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." Since the introduction of the interim measures sale and rent back firms must be authorised or face fines or imprisonment.

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