Tue 31st Oct, 2006
FSCP expresses doubts about new finance regulation
The Financial Services Consumer Panel (FSCP) has expressed concern about the announcement by the Financial Services Authority of the final rules for the regulation on home reversion plans. The plans will be regulated by the FSA from 6 April 2007, following recent parliamentary approval of the necessary legislation.
The chairman of the FSCP John Howard said the panel had had several discussions with the FSA about home reversions and remained concerned about consumer protection. With home reversions being equity release products used by many elderly people to boost their retirement income, consumers must be careful, said the panel.
Specifically, the panels concerns are:
- ‘Firstly, the new FSA rules will allow these products to be sold without advice, when this reduces the existing protection under trade body guidelines which said that advice should always be given;
- Secondly, there will be one valuation of the property for both the consumer and the firm purchasing part of their property, so consumers may not get the best price for the portion that they are selling.
- Thirdly, the Treasury has imposed a twenty year limit on home reversion schemes to differentiate home reversions from other loans – and yet this will mean that if a consumer aged around 60 takes out a home reversion, they could face eviction from their home when they are around 80, when the investor would be able to demand the return on their capital investment, with inevitable consumer worry and detriment.’
Howard said: ‘We have repeatedly stated our concerns to the FSA – these are complicated products, purchased by elderly people who are often less able to look after themselves, and which will need to be fully explained to consumers. We do not think that the FSA’s new rules go far enough to protect consumers.’