The Financial Conduct Authority – About Sale and Rent Back (SRB)
Since 30 June 2010 we have regulated firms that offer sale and rent back (SRB) to consumers. This replaced our interim regime, which ran from 1 July 2009. SRB involves people selling their home, usually at a discount, in exchange for the right to remain in the property for a minimum of five years.
Summary of FCA requirements
Our rules are designed to help protect consumers. We want to prevent high-pressure and inappropriate sales, and help consumers understand SRB products so they only enter into SRB where it is an appropriate and sustainable solution for them.
The full SRB regime helps to protect consumers by:
• ensuring consumers have better security of tenure through a fixed-term tenancy agreement of at least five years;
• requiring that firms always check the consumer can afford the deal and it is right for them;
• requiring firms to make sure the consumer has checked their ongoing entitlement to benefits;
• introducing a cooling-off period of 14 days to give consumers more time to make decisions;
• banning cold calling and prohibiting firms from dropping promotional leaflets through letter boxes;
• prohibiting the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature;
• requiring firms to provide consumers with a consumer factsheet and other additional information to help them make informed decisions; and
• ensuring that an independent valuation is carried out where the valuer owes a duty of care to the consumer in all sales.
Firms have to meet our rules on the amount of capital they hold. They must also have professional indemnity insurance and effective systems and controls in place.
Our approved persons regime applies to sale and rent back firms, to make sure that the individuals involved in the firms are ‘fit and proper’.
Reporting to the FSA
We introduced a full reporting regime on 30 June 2011. Our policy and rules on how SRB firms must report information to us is set out in Policy Statement 10/8 – Regulatory reporting for sale and rent back.
Here is a summary of our requirements:
• SRB advisers and arrangers will need to send in a half-yearly report using the retail mediation activities return (RMAR).
• SRB providers and administrators will need to send in sections A to H of the mortgage lending and administration return (MLAR) quarterly. Sections J and K of the MLAR will need to be submitted annually.
• Firms with a combination of these permissions will need to send in both the RMAR and MLAR.
• All SRB providers will also need to collect product sales data quarterly.
• All SRB firms will need to send in a half-yearly complaints return.
Firms will receive clear instructions on how to submit these returns to us.
All firms that carry out SRB business need to be authorised by us, unless they are exempt or using a legitimate exclusion. If you do business without being appropriately authorised you are committing a criminal offence. We are continually monitoring the market for unauthorised business and will take action against firms or individuals found to be carrying out SRB activities without our permission. If you become aware of, or suspect a firm or individual of carrying out, unauthorised business, please report it to us immediately.
The Mortgage Market Review
Sale and rent back is a type of home finance and was included under the Mortgage Market Review. SRB will therefore benefit from the reforms we are introducing in April 2014. For more information about the Mortgage Market Review and its impact on SRB click here.
Source: Financial Conduct Authority