'Illegal actions' of sale and rent back firms slammed by charity

23/10/2009

Sale and rent back companies are not comploying with the rules, Shelter said yesterday (October 22nd).

According to the charity, many "unscrupulous" organisations are still in operation, even though the Financial Services Authority (FSA) has recently launched a crackdown on malpractice in the sector.

Shelter found that four of the 18 firms which advertise sale and rent back services in the press have not signed up to the FSA's interim regulations, even though they are required to do so by law.

Sale and rent back works when a homeowner who is having trouble making their mortgage payments sells their property at a reduced price to a third party.

They are then allowed to stay in the house in exchange for paying rent.

Prior to the FSA launching its new regulations, many firms were found to be offering customers very short rental contracts, meaning that they could be evicted soon after selling the property.

The actual sales prices of the homes themselves were also found to be very low among some sale and rent back providers.

Kay Boycott, Shelter director of policy and campaigns, said: "We are shocked to discover some rogue and unregulated companies have the nerve to advertise in national newspapers when they are operating completely outside of the law.

"If almost a quarter of the big firms who are advertising in national newspapers are unregulated, then it is highly likely that many more of the smaller companies are operating completely under the radar."

Kevin Still, director of EuroDebt, commented: "We are concerned that vulnerable homeowners in financial difficulties and struggling with debt may turn to the wrong company. Where we are looking at providing Debt Management Plan or an IVA where sale and rent back may be involved then we would check the company out in advance.

"This can be done by accessing the FSA register at http://www.fsa.gov.uk/register/interimAuthorised.do. There is a listed of interim authorised companies with details of what they are authorised for."

The FSA's interim sale and rent back regulations began in July 2009, with a full set of rules to take effect from 2010.

Tags; Housing Debt and Bills, Young Family Finances, Credit Card Lifestyle,

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