The UK Financial Services Authority (FSA) is to regulate sale and rent back schemes with an emergency interim regime that will come into force in July to address the growing threats consumers are facing in today's deteriorating lending market.
The UK Financial Services Authority (FSA) is to regulate sale and rent back schemes with an emergency interim regime that will come into force in July to address the growing threats consumers are facing in today's deteriorating lending market.
SRB schemes involve individuals selling their home, usually on the cheap, and obtaining an agreement to remain in the property as tenant for a set period - typically six to 12 months. The decision by the FSA stems from growing evidence that some sale and rent back firms are misleading customers as to the value of their property or the security they have as tenants and that some firms are imposing substantial rent increases or even evicting tenants after a short tenancy period. As a result, the City watchdog plans to implement an interim regime in July, while a full regime will come into force in the second quarter of 2010.
Dan Waters, FSA director of retail policy, said: 'We believe the issues warrant a fast response, which is why we are seeking to bring in an interim regime this summer designed to ensure fairer treatment of customers as soon as possible, including the right to redress. We will then develop a more comprehensive regime to come in from next year.'
He added: 'This two-stage approach is a new departure for us, but we believe it provides the right balance between implementing regulation quickly in order to address more serious cases of detriment, while giving us time to develop and implement a full regulatory regime that is suitable for the SRB market.'
Under the interim regime SRB firms will need to meet FSA threshold conditions including the requirement to be run by fit and proper people, to adhere to the Principles for Businesses and to meet some systems and controls and conduct of business rules.
