Is Equity Release Regulated by the Financial Conduct Authority?

The Financial Conduct Authority (FCA) makes sure that equity release schemes are fair for the customer.

If you’re concerned about equity release and whether it’s fair, you should feel reassured that the FCA is there to protect you and make sure you aren’t given a product that isn’t suitable for you.

Are Equity Release Schemes Regulated by the FCA?

All equity release schemes in the UK are regulated by the Financial Conduct Authority, and every lender must comply with the regulations they set out. The FCA only recommends the use of lenders on the Equity Release Council.

Read on to find out more about the FCA’s role in equity release.

Looking for other information on Equity Release? This guide has info on 'Are equity release schemes are regulated by FCA?' We have also written extensively about:

• - Who is equity release good for?
• - Who are members of the equity release council??
• - Why is equity release tax free?
• - Does equity release affect my pension credit?
• - Will equity release be affected by brexit?

We update all our guides regularly. If you are researching Equity Release and we haven't got an exact guide that helps you, keep coming back as we update daily.

Who Are the Financial Conduct Authority?

The Financial Conduct Authority is an independent organisation in the UK responsible for the regulation of the various financial markets. Their purpose is to protect consumers and to promote competition to ensure that people get the best deals for them and that they aren’t treated unfairly.

When it comes to equity release, that means making sure customers are offered an appropriate loan and that they aren’t taken advantage of. Considering how equity release is targeted at people in retirement age brackets who are more likely to be vulnerable, this protection is absolutely vital.

Equity Release: Who Is Regulated by the FCA?

When it comes to equity release, everyone involved is regulated by the Financial Conduct Authority. Your lender must follow the rules set out by the FCA, as must the financial adviser you use if they are completely independent from the lender.

If they do not follow the guidance that the FCA has set out, then you may have a case to claim your equity loan was mis-sold, and you may not be liable to repay it. This is extremely unlikely as lenders and financial advisers are stringent, but it’s something you should be aware of.

Equity Release: What Standards Does the FCA Guarantee?

The FCA sets out its guidance in its Conduct of Business Sourcebook for Mortgages and Home Finance. Chapter 8 is all about Equity Release

There are four main principles that the chapter sets out to do:

• Ensure that customers are fully informed about the nature of the service that a lender or broker will give, including a full range of services available and the costs that will be incurred
• Ensure that customers are given suitable and honest financial advice
• Ensure that any customer applying for equity release is given advice
• Ensure that, where the customer has specifically asked to not be given advice, they are properly warned of the implications of doing so if they wish to still take on a loan

Following this, there are various guidelines put in place, which we’ve adapted for your convenience. These are all available in chapters 8.5 of the handbook found at the link above.

• All firms selling equity release loans must provide financial advice to the customer. The customer can reject this advice if they wish.
• The firm must take reasonable steps to make sure that equity release is suitable for that customer, and that there aren’t better alternatives. This includes taking reasonable steps to get all required information from a customer, and not simply proceeding with limited details.
• In terms of deciding whether equity release is suitable, a firm must show that it considers any adverse effects on customers’ means-tested benefits or their tax position, and weighs them up against the benefits of the loan
• The firm must also explore alternative methods for raising funds including any local authority grants the customer could be eligible for, or taking further funds from existing mortgages or equity release plans if the customer already has one
• The firm must take into account the customer’s health and life expectancy, as well as their wishes for their estate and their future plans including whether they’re likely to move to a new house
• The firm must ensure the customer needs any additional features as part of their equity release loan, and not simply assume that they do or do not want that feature added
• The firm must check whether it suits the customer more to pay any fees and charges upfront or whether they should be added to the debt owed, depending on the personal circumstances of the customer
• Where there may be an impact on means-tested benefits, but the firm doesn’t have the required information to check, they should direct the customer to an appropriate source to find out more such as the Pension Service or HMRC
• If the customer intends to pay off debts with their equity release loan, the firm should check that other solution wouldn’t be more suitable, including negotiating a repayment plan with creditors

Finally, a firm must also keep records of the advice it has given, and the reasons for suggesting the financial options discussed. This also includes keeping a record of why customers rejected any of the available options and any preferences they have.

These records must be retained for at least three years from the time that the advice was given so that if the customer feels they were given bad advice they have time to revisit their records.

How to Complain if You Feel You’ve Been Mis-Sold Equity Release

While it’s the Financial Conduct Authority that sets the guidelines for equity release loans, you’d actually need to speak to the Financial Ombudsman if you felt like yours or a relative’s equity release loan was mis-sold and you wanted to make a complaint.

You can make a complaint on the Financial Ombudsman’s website at financial ombudsman or via telephone on 0800 023 4567. In order for the Ombudsman to deal with your complaint you must first have made a complaint to the business involved, in this case your adviser or lender. Once you’ve received their final response, if it’s not to your satisfaction the Ombudsman can step in.

The Ombudsman will look at the guidance set out by the Financial Conduct Authority and the Equity Release Council, and examine the advice given to the customer. They’ll look at whether the customer could fairly be judged to be vulnerable, and whether alternative methods of finding the money the customer needed were explored.

If the Ombudsman finds that the lender didn’t act appropriately, there are three courses of action open to them:

• They may ask the lender or adviser to pay compensation to you, to apologise for any distress or inconvenience you have suffered
• They may refund an early repayment charge if it was applied incorrectly. You’d also potentially get interest on this payment.
• If it’s found that equity release wasn’t right for you but you were coerced into it, the lender or adviser could remunerate you to ensure you were back in the financial position you would have been had you been given the correct advice.

Most cases won’t ever make it to the Financial Ombudsman but it’s useful to have their support if you feel that you or a loved one hasn’t been treated correctly. However they aren’t a get-out card if you have changed your mind – if you’re given correct advice and take equity release but have then wished you’d picked an alternative, you’ll need to repay the loan with any valid early repayment charges.

In Summary

Equity release schemes are carefully monitored by both the Financial Conduct Authority and the Equity Release Council. As long as you work with a reputable lender that is registered with the ERC, you don’t need to worry about being conned.

You do need to still make sure you fully understand equity release before you apply, including any charges you’ll be liable for. Our website has plenty of information to guide you

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.