Regulation now in sight for sale and leaseback

The Council of Mortgage Lenders welcomes today's consultations by the Treasury and the Financial Services Authority on implementing regulation of the currently unregulated sale and leaseback sector. The CML has campaigned for nearly two years for this sector to be regulated. It is potentially of increased relevance at a time of rising arrears and possessions, and it is important that customers can have confidence that the companies they deal with are fit and proper and properly regulated in their business activities.

The FSA's innovative interim approach to regulation means that sale and leaseback will be regulated from July this year. This is helpful, as we share the FSA's view that urgency is needed. It follows closely on the decision by the Office of Fair Trading to approach a number of sale and leaseback companies about their misleading marketing information, so we particularly welcome this joined up regulatory intervention. People who use sale and leaseback arrangements as an alternative to repossession need the consumer protection afforded by regulation and the Financial Ombudsman Service as soon as possible.

While voluntary initiatives, such as industry codes of practice, have improved protection and standards among more ethical sale and leaseback operators, the lack of a universal framework has been worrying, given that people may be most likely to use this type of scheme at a vulnerable time in their lives. If in doubt, customers should seek advice before making a decision to sell their properties and become a tenant instead. Lenders are committed to helping people sustain their home ownership through short term financial difficulties.

CML director general Michael Coogan said:

"Lenders cannot always avoid repossession action through the courts, and sale and leaseback could potentially be a realistic alternative for some people as a last resort. But basic regulated standards of fair treatment and redress are essential, to avoid vulnerable households being exploited by unscrupulous operators. We look forward to the July implementation of regulation - in the meantime, consumers should continue to make sure they have explored all the options with their lender before considering this route and if they choose sale and leaseback be extremely careful."