Mis-sold Equity Release. Don’t Be Fooled.
As people near retirement and begin to explore later-life financing options what is the right path?
With the cost-of-living crisis burdening many retirees in 2024 equity release could be a viable solution for homeowners looking to obtain desperately needed financial flexibility.
However, as with any financial product, it is essential to understand how to protect yourself before taking out this kind of loan.
Equity release is supervised by the Equity Release Council (ERC) and regulated in the UK by the Financial Conduct Authority (FCA), which ensure high standards of quality service and protection for homeowners.
Here are some insights on equity release, based on years of experience in the industry and extensive research on the latest trends and developments.
Explore how regulations impact equity release and how they contribute to consumer protection.
By understanding the significance of these regulations, you will gain a better understanding of the safety measures in place.
What Is the Equity Release Council?
The Equity Release Council (ERC) is a trade body that represents the equity release industry and promotes best practices and standards among it's members.2
In addition to guiding financial advisors, it also provides public education about equity release and the various means of accessing home equity.
The Role of the ERC in Ensuring Safety
The role of the ERC in ensuring safety is to protect consumers accessing any form of equity release through issuing equity release rules and regulations their members must adhere to.
If a service provider involved in the equity release value chain is not included in the ERC's public list of approved service providers, it should raise concerns for potential customers.
This could indicate a significant risk of being disadvantaged if they choose to engage in business with that particular provider.
Standards Set by the ERC
The standards set by the ERC are designed to ensure that equity release products are safe and reliable for homeowners.
They provide several benefits, such as:
A No Negative Equity Guarantee, which means that you will never owe more than the value of your home, even if the interest accumulates over time or the property value falls.
A right to remain in your property for life or until you need to move into long-term care, as long as you comply with the terms and conditions of your contract.
A right to move to another property without penalty, as long as the new property can be used as security for your loan by your provider.
Lifetime mortgage rates must be fixed or capped for the loan's duration.
Customers who sign up for new plans that adhere to the standards set by the Equity Release Council must be able to make penalty-free partial repayments, subject to lending requirements.
These standards are designed to ensure that providers adhere to ethical practices and transparency.
Benefits of Working with ERC-Approved Providers
The benefits of working with ERC-approved providers include having peace of mind and knowing that your interests are protected.
The ERC promotes the following measures for consumers considering equity release:
Protection: Members must adhere to a strict set of rules and designed to protect the interests of homeowners.
Independent advice: Members are required to ensure that homeowners receive independent financial advice before making any equity release decisions.
Flexibility: Members offer a range of flexible products and features to meet the specific needs of homeowners.
Security: Providers must offer a No Negative Equity Guarantee, which ensures that homeowners (or their estates) will never owe more than their home sells for.
Transparency: Members are required to provide clear and transparent information to homeowners about the costs and risks associated with their equity release.
Regulation: Providers are authorised and regulated in the UK by the Financial Conduct Authority (FCA), which ensures additional protection for homeowners.
Professional standards: Members must adhere to a strict code of conduct and are committed to upholding the highest professional standards.
Consumer confidence: Working with members of the council can give homeowners confidence that they are reputable and trustworthy providers.
Innovation: Providers are committed to innovation and are constantly developing new products and services to meet the changing needs of homeowners.
What Is the Financial Conduct Authority?
What Is The Financial Conduct Authority (FCA)? They are the UK's financial services regulator, responsible for ensuring that financial products and services are provided fairly and transparently.
The Role of the FCA in Regulating Equity Release
The role of the FCA in regulating equity release includes setting guidelines to ensure that they operate in a way that protects consumers.
FCA Guidelines for Equity Release Providers
The FCA's guidelines for equity release providers cover product information, legal advice, pricing, and consumer protection.
Namely:
Clear and concise product information for consumers
Independent legal advice for homeowners seeking equity release
Fair and transparent pricing and fees
Consumer protection measures, including the No Negative Equity Guarantee
How to Check if an Equity Release Provider is FCA Authorised and Regulated
You can check if an equity release provider is FCA authorised and regulated by consulting the FCA website.
What Is the Financial Services Register? The FCA maintains a register of regulated companies that can be accessed online.
By checking the list, you can make sure that the provider follows FCA rules and has a track record of treating customers fairly.
FCA's Caution to Advisors: Equity Release Advice Under Scrutiny
The FCA warns advisors it will look at equity release amid an increase in equity release and concerns regarding the quality of service offered.This has increased the rate of mis-selling and harm to equity release investors.
Mis-Sold Equity Release
Mis-sold equity release was an unfortunate reality of equity release mortgages in the UK in the early years of the industry.
In the late 1980s, homeowners were sold unsuitable home income plans without proper advice or disclosure of the risks.
It is important to be aware of the signs of mis-selling and know what to do if you believe you have been a victim.
Common Ways Equity Release Can Be Mis-Sold
Some of the common ways that equity release can be mis-sold include misleading advertising, providing insufficient information on the product, and not considering your circumstances.
The FCA has very strict guidelines on advice and selling standards.
Some warning signs to look out for:
High-pressure sales tactics or misleading advertising
Failure to disclose all fees
Failure to disclose the risks associated with equity release
Selling an unsuitable product based on the homeowner's circumstances
Signs of Mis-Selling to Watch Out For
Signs of mis-selling to watch out for include high-pressure tactics and guarantees that seem too good to be true.
Beware of these red flags:
Pressure to make a quick decision without adequate time for research or advice
Promises of guaranteed returns or seemingly unrealistic outcomes
Lack of transparency regarding fees or charges
Failure to provide independent legal or financial advice
What to Do If You Believe You Have Been Mis-Sold
If you believe you have been mis-sold equity release, you should take action as soon as possible.
The first step is to contact the provider and express your concerns.
If you are not satisfied with the response, you can escalate the complaint to the Financial Ombudsman Service (FOS), an independent body that can investigate and resolve disputes between consumers and financial services providers.
The FOS can order the provider to provide compensation if it finds that mis-selling has occurred:
The FOS may only consider cases that have been brought within six years of the alleged mis-selling or within three years of the complainant becoming aware of the issue.
Whilst equity release can be a safe and viable option for retirees, it is essential to understand the commitments involved and to seek professional advice.
Regulatory bodies like the ERC and FCA ensure consumer protection, and there are organisations that could assist with retirement finances.
By researching providers and seeking guidance, you can make informed decisions that meet your financial needs and goals.
So, remember to prioritise knowledge and seek professional support to ensure that equity release is safe for you.
NOTE: We claim no right or title to this article which appears in Every Investor dot co dot uk. Author acknowledged as Katherine Read.
If you think you or a loved one has been the victim of mis-sold equity release contact Claimline Legal UK today on 0800 779 7457 or go to www.missoldequityrelease.co.uk
Get a free no obligation review of your case and be put in contact with highly experienced claims experts today.
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