Protecting consumers in the sale and rent back market
Submit Articles Back to Articles
Issued 06 February 2009
The Government is today launching a consultation document on strengthening
protection for vulnerable homeowners. The Government is proposing that
companies offering sale and rent back agreements, which may target homeowners
facing repossession, should be brought within the scope of Financial Services
Authority (FSA) regulation. The consultation sets out the details of the
proposed legislation and will close on 1 May 2009. The
FSA has published a separate consultation alongside on the detail of its
proposed new regime.
The consultation follows an Office of Fair Trading (OFT) market study
published at the end of last year, which looked at the impacts of the growing
sale and rent back market. The OFT report identified that there are a number of
risks to homeowners entering into these arrangements and made three
recommendations to Government, including compulsory regulation, increasing
consumer awareness and improving information about housing benefits.
The Government accepted the OFT's recommendations. Its proposals today
include a two-stage approach to regulation, in order to ensure consumers are
protected as quickly as possible in the current market environment. Subject to
the outcome of consultation and Parliamentary approval, the Government is
proposing that the FSA puts in place an interim regime by July 2009. The FSA
will put in place its full regulatory regime following consultation and the
publication of its final rules.
The launch of the consultation today follows action taken by the OFT last
week asking 16 sale and rent back providers to substantiate claims made in their
The Government's proposals build on the comprehensive package of support for
homeowners facing financial difficulties.
The Chief Secretary to the Treasury, Yvette Cooper, said:
“Many people are worried about their homes and their mortgages right now.
Unscrupulous companies must not be allowed to exploit people when they are
vulnerable with dodgy deals that end up pushing people out of their home. The
OFT found some shocking cases. That's why in this consultation the Government is
proposing tough new regulation to give vulnerable homeowners better protection
when they need it”
Housing Minister, Margaret Beckett said:
"We are determined to give as much support as possible to home owners who
maybe facing difficulties right now. These new proposals will help to protect
vulnerable consumers at risk from unscrupulous companies seeking to exploit
households in the current climate. This is part of the wide range of actions we
are taking to restore stability and confidence in the housing market and to
ensure real help is in place for those who need it most.”
- The sale and rent back (also known as sale and lease back) market offers
homeowners the option of selling their properties at discounted rates in
exchange for tenancy arrangements. Sale and rent back agreements effectively
combine two transactions – firstly, individual homeowners sell their property
at a discount, and secondly they are offered an agreement to remain in the
home as a tenant.
- At Budget 2008, the Government asked the Office of Fair Trading (OFT) and
the Financial Services Authority (FSA) to investigate the sale and rent back
market, focusing on consumers’ experience of these arrangements, and consider
options where appropriate to strengthen consumer protections. On 14 May the
OFT announced that it would conduct a formal market study, working to an
expedited timetable in light of stakeholder concerns.
OFT published its report on the sale and rent back market study on 15
- The Government published its
reponse to the OFT market study on 22 October 2008.
OFT announced it had taken action in relation to advertising by sale and rent
back providers on 30 January.
- The Government published its
consultation on regulating the sale and rent back market on 6 February
- The FSA
published its consultation on the details of an interim regulatory regime
for the sale and rent back market on 6 February 2009.
- The Government is taking a range of other steps to support homeowners and
help them avoid repossession including:
- Statutory regulation of mortgages and credit provides homeowners with
important protections and appropriate means of redress. In 2004 the
Government extended the scope of FSA regulation to cover first charge
residential mortgages. The FSA’s regime requires that lenders only move to
repossession as a last resort. Regulation of other credit business is
covered by consumer credit legislation, administered by the Office of Fair
- In the 2008 Pre-Budget Report, the Government announced the creation of
a new Lending Panel bringing together Government, banks, trade bodies,
regulators, and consumer groups to monitor lending to businesses and
households. The major mortgage lenders on the Panel have agreed to a
moratorium on repossessions - committing not to repossess for at least 3
months after an owner-occupier falls into arrears. Some mortgage lenders
have now gone further, and committed not to repossess for at least 6 months
after an owner-occupier is in arrears. The Government welcomes these
- The Government’s recently announced Mortgage Rescue Scheme and Homeowner
Mortgage Support Scheme, together with recent changes to make Support for
Mortgage Interest (SMI) more generous, will help to ensure that homeowners
who experience a temporary income shock, lose employment, or are otherwise
vulnerable, are able to remain in their homes.
- The Government is determined to ensure that every household struggling
with debts can access free and impartial debt advice. In the Pre-Budget
Report 2008, the Chancellor of the Exchequer announced £5.85m additional
investment in telephone advice during the period to March 2011, and £10m to
March 2010 for Citizens Advice bureaux to expand face-to-face debt advice
capacity. Both measures will help to ensure that advice and support is
available for borrowers who may need it.
About the Author
© Crown Copyright. Material taken from HM-Treasury.
Reproduced under the terms and conditions of the Click-Use Licence.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2009-02-10 11:31:27 in Business Articles