From 6 April 2007, companies offering home reversion policies must be regulated, as almost every other financial services provider is, by the FSA (Financial Services Authority).
Under the new regime, firms offering Home Reversion Plans must be fit and proper and appropriately resourced with staff competent to undertake this business. Consumers should also get clear, concise and consistent information about a firm's services and products on offer so they can make informed choices. If things go wrong, consumers will be able to obtain redress, if appropriate.
Dan Waters, director of retail policy at the FSA, says: "Regulation of these products represents an important step in the regulation of housing finance. It allows the FSA to deliver a level playing field by extending consumer protection over both sectors of the equity release market. The FSA is also working to promote wider public understanding of these products as part of our consumer education objective."
Home reversion plans are a type of equity release product, involving a sale and lease arrangement. They are generally aimed at older homeowners and are designed to enable them to benefit from the value of their home without having to move out. The homeowner releases equity tied up in their property by selling all or part of it to a provider, which may be an insurance company or a bank. The provider normally allows the homeowner to remain in the property under a lease for the rest of their life.
The FSA already regulates the other main type of equity release product, Lifetime Mortgages. Equity release products is one way families can pay for the high costs of long term care of the elderly in a home or in their own home.