Following a review of all regulated SRB firms, the FSA has referred one firm to its enforcement division while others have either stopped taking on new business or cancelled their permissions.
This means the entire SRB market is temporarily shut.
The FSA said it had reviewed 22 SRB firms. Only nine had been active since the FSA began regulating SRB. Of these nine, five have now stopped doing SRB business, three have kept their regulatory permissions but decided not use them for the foreseeable future, and five have agreed to undertake past business reviews.
One firm will only purchase second-hand SRB contracts from other firms.
The regulator said the most common failings of SRB firms were:
– Not correctly assessing appropriateness and affordability, and not giving customers enough time to consider agreements
– Failing to disclose key facts of an SRB agreement in the correct order or at the right time
– Failing to provide agreements with correct information
– Operating inadequate sales processes which do not allow them to gather enough information to assess appropriateness
– Running financial promotions which breached FSA rules
– Operating inadequate training and competence, compliance monitoring, and record keeping procedures.
The FSA will now focus on working with firms conducting past business reviews to ensure any affected customers are treated fairly.
Nausicaa Delfas, the FSA’s head of mortgage and general insurance supervision, said: “Sale and rent back is often the last resort for struggling homeowners so we expected to see firms treating their customers much better than this report suggests.
“The resulting temporary closure of this market could have been avoided if sale and rent back firms had taken the time to fully understand their regulatory responsibilities and customers’ needs. It seems most were more focussed on their own commercial success rather than the welfare of the customers, with one firm even resorting to fraud.
“This is an example of the type of action that the FSA, and in future the FCA, will increasingly be taking to protect consumers.”
