The Financial Services Authority (FSA) has recently published new rules aimed at protecting vulnerable customers in the sale-and-rent-back (SRB) sector from companies that use “aggressive or unfair” sales methods.

From 30th June 2010 the FSA has:

Banned any exploitative advertising and high-pressure sales techniques using emotive terms such as ‘fast sale’, ‘mortgage rescue’ and ‘quick cash’ being used in any advertising or promotional literature.

A 14-day cooling-off period has been introduced to give homeowners more time to make decisions on sale-and-rent-back.

The FSA has introduced a ban on cold sales calls and not allowing firms to distribute SRB promotional leaflets through letter boxes.

In addition, homeowners entering an SRB agreement from 30th June onwards are to have security of tenure for a minimum of five years.

The FSA has also recently set out the rules which will ensure there are proper protections in place for vulnerable customers in arrears on their mortgages or entering SRB agreements.

All firms active in the sale and rent back market must now be authorised or face potential fines and the FSA is proactively monitoring the SRB market for unauthorised activity.

Customers in arrears must be treated fairly by firms and the following key areas have been confirmed:

Firms must not apply a monthly arrears charge where an agreement is already in place to repay the arrears;

Payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later; and Firms must consider all options for borrowers and repossessions should always be the last resort.

Lesley Titcomb, FSA director responsible for the mortgage sector, said: "With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling them to unscrupulous sale and rent back companies, tighter controls were vital. Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.”

The measures announced today will also require that mortgage sales staff have to be FSA approved or face a penalty and that all firms active in the sale and rent back market must be authorised or face potential fines.