Mortgage borrowers given protection from ‘unscrupulous’ lenders

New rules demanding tough standards from firms dealing with arrears and sale and rent back customers will come into place next week, alongside plans to make all mortgage advisers personally accountable for their actions.

The crackdown on 'unscrupulous' sale and rent back companies – which often appeal to consumers who are facing repossession or need cash quickly - comes after complaints of misleading advertising, low valuations and extremely short-term tenancy agreements led to an investigation which uncovered evidence that firms were short-changing consumers. Under the schemes the consumer sells their property, often at a steep discount, to the firm, which should give them the right to stay in their home for a fixed period as a tenant.

But high pressure sales techniques will now be banned as will tactics such as cold calling. Consumers will also have a two week cooling off period.

Under the Financial Services Authority’s plans, lenders’ much-criticised treatment of borrowers in arrears will also be tackled, with the requirement that the firm considers all options for a borrower, with repossession a last resort.

The regulator is also cracking down on mortgage advisers, after a regular trickle of cases involving fraud and subsequent FSA enforcement. All mortgage advisers and those who arrange non-advised sales will be held personally accountable.

Lesley Titcomb, the FSA director responsible for the mortgage sector, said: ‘Today’s rules make absolutely clear the standards we expect of firms, and we have already taken tough action against some of the worst offenders.’