The Financial Services Authority (FSA) has published a report that shows most sale and rent back (SRB) transactions were either unaffordable or unsuitable and never should have been sold.
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. Effectively, this means the entire SRB market is temporarily shut, the regulator said.
Of the 22 firms reviewed, only nine had been active since the FSA began regulating SRB. Of this nine, five firms have now stopped doing SRB business, three have kept their regulatory permissions but decided not to use them for the foreseeable future, five have agreed to undertake past business reviews (which may result in consumer redress), and one will only purchase second-hand SRB contracts from other firms.
The FSA said that if customers with existing SRB agreements have concerns about their agreement they should in the first instance contact their SRB provider, or seek professional advice.
It found that often SRB firms did not correctly assess appropriateness and affordability, and customers were not given enough time to consider the agreement.
Also, in many cases, agreements contained incorrect information and did not meet the FSA’s requirements for tenancy agreements.
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.