FSA research finds major problems for consumers buying equity release

24 May

The FSA has today published damning research on the way consumers are being advised to buy equity release – also called lifetime mortgages – to release the value of their home in retirement, according to the Financial Services Consumer Panel.

The Panel asked the FSA to make investigation into equity release a priority area when it took over responsibility for mortgage regulation towards the end of 2004. The fact that the FSA found that, of their mystery shoppers, 95% were not asked if they needed to generate a stable income, and 78% were not asked about their state of health and life expectancy, is evidence that the Consumer Panel's concerns about the selling of these products were justified.

The Panel welcomes the FSA's use of mystery shopping to investigate the selling of equity release. We have been calling on the FSA for some time to use mystery shopping to check the real experience of how consumers are being sold financial products. Such stark results should encourage the FSA to test the consumer experience more in the future. The Panel will continue to press for them to do so.

Ann Foster , Chairman of the Consumer Panel said:

"Equity release is targeted at a particularly vulnerable group of consumers who are heavily dependent on receiving good advice – the consequences of receiving bad advice are far reaching and can lead to considerable problems in old age. These are damning results for those advising on equity release. We call on the FSA to take strong follow up action to make sure that they carry out their statutory duty to protect consumers of financial services in the area of equity release."

Notes to editors

1. The FSA is releasing the results of its mystery shopping by press release and briefing on its website: www.fsa.gov.uk.

2. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status. The FSA must consider its representations and, if it disagrees with a view expressed or proposal made in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.

3. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit.

4. Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

5. There are currently fifteen members of the Panel as listed below. For further information on individual members, see About the Panel.

   Ann Foster (Chairman)
   Dianne Hayter (Vice Chairman)
   Yvonne Gallacher
   Harriet Hall
   John Howard
   Tony Hetherington
   Stephen Locke
   Nick Lord
   

   Nick Pearson
   Adam Phillips
   Paul Salvidge
   Robert Skinner
   Carol Stewart
   Richard Smethurst
   Dave Watts