The Government has released detailed plans to control the sale and rent back market, good news for secured borrowers who are suffering with their debts.

The Financial Services Authority has released full regulation of Sale and Rent Back – particularly the much stricter conditions on promoting these schemes and making sure that people in debt trouble are not abused.

Sale and Rent Back is targeted at those who are in financial difficulties who may be vulnerable to selling techniques which obscure the downsides. The last thing those who are struggling need to hear is a cowboy pouring honey into their ear, telling them that they should sell their home to pay off their secured and unsecured debts.

As a result, the FSA says it will be banning cold-calling, leaflet dropping and the use of emotive phrases in promotional material will be crucial, along with tighter monitoring of the activities of these firms.

Adam Phillips, chairman of the Financial Services Consumer Panel says: "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: people see the promise of being able to stay in their own home and get cash up front quickly, without necessarily being warned of the longer-term consequences.

"However, we still have worries that firms will try to exploit consumers both within the rules, and by trying to operate outside the rules. The fact that only around 80 firms have applied for FSA authorisation, when the OFT had judged that there were over 1000 firms undertaking sale and rent back, means the FSA must watch the authorisation boundary carefully."

If you are at your wits end, only ever consider selling your home and renting it back after your have spoken to financial advisers, your lenders, debt charities and your family. It can be a sensible option, but only to a small minority – for the other struggling secured borrowers there are always less severe options.

SOURCE: FSA, FSCS, 29/01/10

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