According to an investigation by consumer giant Which? Money the advice given by these firms is ‘shoddy’ and it has reported two to the Financial Services Authority, the UK’s financiual watchdog.
Out of 17 advisers across nine firms contacted by Which? Money researchers about SRB, which is when a company buys your home and rents it back to you, just two offered acceptable advice.
Seven advisers failed to discuss whether SRB was the right option for the customer, with six of these going on to give quotes. One adviser even gave a quote that would not have left the customer enough money to pay off their debts, the very reason they had given for considering SRB as an option. And at another company, the adviser didn’t even ask how much the customer’s debts were.
‘It’s simply unacceptable that people are receiving shoddy advice about such a huge financial decision,’ said Which? chief executive, Peter Vicary-Smith.
‘Not only are regulated firms not doing enough to ensure vulnerable consumers make the right choices, some are offering sale-and-rent-back that aren’t authorised to do so. The FSA must tighten the screw on these firms to make sure the rules are followed and consumers are protected,’ he added.
Sale and rent back is usually a last resort for people who are struggling with debt but don’t want to move home. Most firms offer between 60 to 70% of the market value of the property. FSA rules mean that SRB firms must offer you a short hold tenancy of at least five years but after that you may have to leave your home.
Which? Money said that two companies, Property Locksmith and Rapid Property Group, have both been reported to the FSA. Property Locksmith is an introducer, and thus not authorised, but in one case gave the Which? Money researcher a quote for SRB.
FSA rules implemented last summer mean that as soon as a customer contacts an SRB company and expresses an interest in selling through SRB, it should explain to them what sort of service it is providing.
Under the rules it should state whether it is an intermediary and, if so, how many companies it deals with and whether those companies are authorised. It should also discuss how much any fees, commissions and charges are likely to be. The firm should explain this verbally, too, and in writing.
