Consumer giant Which? calls SRB firms 'shoddy'

Advice on SRBs (sale and rent backs) given to the people most struggling to pay their mortgage, is woefully inadequate according to consumer giant Which?

According to a recent Which? investigation the money advice given by these firms is ‘shoddy’ and they have reported their finds to the Financial Services Authority, the UK’s financial watchdog.

SRB, Sale and Rent Back is usually a last resort for people who are struggling to pay their debts but would prefer not to sell their homes. Most firms offer between 60% to 70% of the market value of a property. FSA rules mean that SRB firms must offer you a short hold tenancy of at least five years, but after the initial rental period they may ask you to leave your property.

In 2010 the FSA introduced new regulations to protect homeowners in debt, which means that all SRB advisors must explain carefully the terms of their policies. Including 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.

However Which’s investigation highlighted that most firms are still not complying to FSA rules. Which? contacted 17 advisers across nine firms, and seven of those advisers failed to discuss whether SRB was the right option for the customer. One advisor gave a quote that would have left their customer enough money to pay off their debts, the very reason why they had contacted the advisor in the first place.

‘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.

Which? Money said that two companies, Property Locksmith and Rapid Property Group, have both been reported to the FSA.