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Goodbye and good riddance sale and rent back

by: Vicky Hartley
  • 03/02/2012
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Goodbye and good riddance sale and rent back
What a mess. The Sale and Rent Back sector has finally been closed five long years after the Council of Mortgage Lenders, Citizen's Advice and Shelter jointly called for regulation, branding the actions of some firms, "daylight robbery."

Today, the FSA issued a report confirming SARB schemes were either “unaffordable or unsuitable and never should have been sold.”

The schemes bought up properties at deep discounts of 25% or more from homeowners in arrears or struggling to keep up with mortgage payments promising to let them stay in situ, often indefinitely, and rent instead.

The problems outlined in the FSA review include the lack of an affordability or appropriateness check before sales, no key facts illustration, incorrect information in agreements and poor sales processes, including sub-standard tenancy agreements. Other problems outlined included industry advertising that breached FSA rules in many cases and inadequate training, compliance and record keeping by firms.

What is strange is that today’s review has uncovered very little that’s new. Another eyebrow raiser is the regulator’s comment it “expected to see firms treating their customers far better than this report suggests.”

The regulator admittedly only started regulating the sector in June 2009. But in just under three years, it watched the sector shrink from an estimated 2,000 firms to just nine active firms, which suggests the model couldn’t operate profitably after a regulatory crackdown. If collaring the shoddy providers and writing a review took nearly three years, this is yet another shining example of how the old FSA wasn’t fit for purpose.

In July 2010, the regulator admitted it knew rogue firms were still operating a year after regulation began and called for help tracking these firms down, but it took another two years, presumably of criminal activity and consumer detriment, to legitimately quash the sector.

So, will new consumer champion the Financial Conduct Authority make a better fist of combating out and out rogue firms or entire sectors in this case, than the FSA has done?

In a speech to the British Banker’s Association last week, Martin Wheatley, managing director of the FSA’s conduct business unit explained how it planned to work its new interventionist stance at length.

But until it can move quicker than the five years it took to regulate an unregulated sector like Sarb, where mis-selling and criminality flourished, the FCA won’t be in a position to do its job.

Heading off problems in unregulated markets before they begin or become entrenched will impress the industry and consumers paying the regulator’s fees.Worthy tools like product intervention, fair outcome testing and checks that products are targeted at the right people can only work in regulated markets.

Sale and rent back was left outside in the unregulated cold for too long.

 

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