Friday, 3 February 2012

Sale and rent back business closed down

The sale and rent back business, where desperate homeowners agree to sell up but are allowed to carry on living in their properties, has effectively been shut down by the financial regulator, the FSA.

But thousands of families will be on their own if they run into problems because of the deals.

The FSA said most of the firms "were more focused on their own commercial success rather than the welfare of the customers, with one firm even resorting to fraud".

Commissions averaged £4,000, and total fees paid by customers ranged up to £40,000.

Most companies offering the service have now pulled out and one is the subject of an FSA enforcement procedure.

Investigators found that sale and rent back providers didn't assess whether customers could afford their terms, didn't give them enough time to decide and drew up agreements using incorrect information.

They were running promotions which broke FSA rules and their training and record-keeping were inadequate.

Only 61 regulated sale and rent back deals have been arranged since the FSA began to regulate the sector in 2009. 5 firms will now conduct a review of these sales to see if customers have lost out.

But the Office of Fair Trading suggested that 50,000 transactions had taken place previously, arranged by 1,000 firms together with an unknown number of professional landlords.

These customers don't have the benefit of financial protection from the FSA and the Financial Services Compensation Scheme if things go wrong.

Even if the 50,000 figure turns out to be an overestimate, as some believe, many thousands could still be at risk.

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