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   Crackdown on home sale-and-rent-back schemesCompanies offering controversial sale-and-rent-back schemes will be banned from using exploitative advertising and high-pressure sales tactics, the City watchdog said today. The Financial Services Authority will also prohibit them from using emotive terms, such as "mortgage rescue", "cash quickly" and "fast sale", in their promotional literature. Firms will no longer be allowed to cold-call customers or drop leaflets through letter boxes, while anyone who enters into one the schemes will be given a 14-day cooling-off period. The new rules are the second stage of the FSA's regulation of the schemes, under which companies buy the homes of people who face having them repossessed and then rent them back to them. The rapidly-growing sector has come in for heavy criticism following claims that some companies pay less than 60% of the market value for properties, while others levy steep rent increases and some evict people after just 12 months. The FSA also confirmed today that firms will have to guarantee that people can continue to rent their homes for at least five years after taking out one of the schemes. Companies will also have to carry out affordability and appropriateness checks to ensure sale-and-rent-back is right for the customer, while the risks involved in the schemes must be clearly flagged up to sellers. These rules aim to counter reported problems of inrent payments being set at unaffordable levels, meaning people have no chance of being able to keep up with them, while in other cases consumers who took out one of the schemes lost benefits they had previously been entitled toitial . Today's rules, which will come into force on June 30, build on the FSA's interim regulation of the sector, which was introduced last July and requires all firms offering the schemes to be authorised by the FSA. Ed Harley, FSA head of mortgage policy, said: "For some people in financial difficulty, staying in their home remains very important. Selling their home and renting it back in this way can be right for them. "But we are aware of some firms exploiting vulnerable consumers at a difficult time. So it is right that we introduce these further protections, and we will take swift action where they are not met." The new rules were welcomed by the Financial Services Consumer Panel, particularly the stricter conditions on promoting the schemes. Adam Phillips, chairman of the panel, said: "Sale-and-rent-back can provide rich pickings for firms seeking to make money from people who are desperate. "Firms have been able to lure vulnerable people into deals which they later regret when the rent rises or they lose their home. "FSA regulation of this area promises to provide better explanation and protection for consumers." But he warned that the FSA must police the sector thoroughly, adding that the panel still had concerns that firms would try to exploit consumers, both within the rules and by trying to operate outside them. He said: "The fact that only around 80 firms have applied for FSA authorisation, when the Office of Fair Trading had judged that there were over 1,000 firms undertaking sale and rent back, means the FSA must watch the authorisation boundary carefully." Campbell Robb, chief executive of Shelter, said: "Shelter highlighted the existence of unscrupulous sale-and-rent-back firms over three years ago which led to last years' interim regulation of the industry. "We are now very pleased to see that the FSA are cracking down further on the underhand tactics used by many in the industry. "We will continue to highlight instances where these new rules are being ignored so that enforcement action can be taken." Source: 24dash.com
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