The Financial Services Consumer Panel has called upon the Financial Conduct Authority to support “the development of holistic tools and guidance” provided by independent bodies such as the Money and Pensions Service, with the aim of helping people to understand and narrow down their range of later life lending options.
Current sales practices around equity release products put consumers at risk of misunderstanding and potentially regretting their choice, the Panel has warned.
Research by the Panel found that the current sales and advice process does not always prevent consumers from experiencing poor outcomes and consumers who purchase from a position of vulnerability may fail to consider the long-term implications.
Wanda Goldwag, chair of The Financial Services Consumer Panel, said: “It is important that consumers, especially vulnerable consumers, are being offered products that suit their needs and are being offered appropriate tools and guidance to ensure they understand the options available to them.
“The Panel’s work sets out where the FCA and industry can work together to build on improvements already made in this market. There’s work to do to consider the development of effective tools and guidance for later life lending, on whether the financial promotions regime is working as intended, and on meeting the higher expectations for consumer outcomes enshrined in the proposed new consumer duty.”
In response, Andrew Gething, managing director at MorganAsh, says the research highlights important issues for the later life lending market.
Gething says: “It is important to understand the consumer’s characteristics and vulnerabilities at the point of sale, to ensure that best advice is given and the transaction is appropriate. This raises the need for a systematic way to screen all applicants for products, as part of the advice process. Many in the industry are only looking at vulnerability when it is highlighted to them from existing customers, whereas every customer really needs to be screened in this way and right at the start of the process.
“The FCA’s consumer panel encourages the use of tools and indeed there is a growing need to collate, assess and store data on customer vulnerability in a systematic way and objective manner.
“This means the systematic recording and objective assessments of consumer characteristics as well as outcomes in order to provide reliable data for all parties and fundamentally ensure that the customer is always given the right advice and provided with the right product for their needs.”
David Burrowes, chair of the Equity Release Council, comments: “We welcome the recognition from the FSCP’s research that industry standards have been vital to ensuring today’s equity release market successfully serves the needs of many consumers. Its work highlights the benefit of strong consumer protections, and the observations it draws from this selection of cases will inform our ongoing work with members, the FCA, MaPS and the panel itself to continuously improve the market.
“While equity release is not suitable for everyone, the majority of customers say it has made a substantial difference to their quality of life. Having launched version 10 of our standards in March, we are committed to building on 30 years of standard-setting work, to ensure as many customers as possible are well served by products which offer the strongest protections of any later life property loan.”
