FSA issues sale and rent-back warning

The FSA has issued a warning to consumers over schemes which appear to pay off a homeowner’s debts, whilst allowing them to remain in their home.

Some schemes, known as sale and rent-back agreements (SRB), may actually leave consumers homeless, according to the judgment on the FSA's website.

The regulator is specifically concerned about exchange with delayed completion (EDC) agreements and lease option products.

EDC's are contracts where homes are sold with a completion delay of a number of years.

Unauthorised firms mistakenly think they can avoid FSA regulation because the sale has not been fully completed, the regulator said.

But dealing with such firms exposes consumers to "increased risks and no regulatory protections," the FSA said.

Lease option products allows homeowners to remain in their house after selling the property. But this would also count as a SRB, which could only be offered by a regulated firm, the FSA said.

Consumers are being asked to contact an adviser if the firm they are dealing with does not appear on the FSA's register.

In September, the regulator announced new regulation of the SRB market. The changes meant that all providers - including individual investors and small firms - must be authorised by the FSA.