In the latest of its enforcement actions in the mortgage market, the FCA announced last week the fining of Quick Purchase Limited for breach of Principle 6.
On the same day the firm's sole director and controlled function holder, Steven Martin, was also publicly censured for his role in the firm's failings.
Quick Purchase, trading as 'Rent My House Back', is an authorised sale and rent back (SRB) provider that permitted customers to enter into 14 regulated SRB transactions without having "reasonable grounds to be satisfied that the transaction was both affordable and appropriate".
The FCA deemed 11 of these transactions to be inappropriate or unaffordable, leading to "significant consumer detriment", with customers potentially relinquishing between 29%-38% of the equity in their homes.
The FCA investigation came off the back of a thematic review of the SRB market it undertook in March 2011. The review highlighted that a number of SRB firms were involved in widespread poor practice, noting in particular that the majority of SRB sales were inappropriate and/or unaffordable.
In particular, Quick Purchase was criticised for failing to ensure that:
- Appropriate customer information was received prior to the consumer entering into the agreement;
- Valuations of all properties were carried out by an independent surveyor; and
- Record keeping was of an adequate standard to comply with MCOB.
The FCA found that Quick Purchase failed to gather detailed information about each customer's financial circumstances in order to determine affordability, including a failure to obtain verifiable evidence on income and expenses, and to ensure these circumstances were fairly reflected in any calculations.
The firm was also criticised for a lack of independent valuations. In 5 cases the valuer used to identify the property's market value was found to only be acting for Quick Purchase, without a joint retainer with the customer. This was considered particularly serious by the FCA, as it absolved the valuer of any duty of care towards the customer. Quick Purchase was deemed to have failed to treat its customers fairly in those instances.
Finally, Quick Purchase was censured for failing to keep sufficient records and demonstrate the affordability of the transaction for each customer. The firm's records suggested it had not considered in enough detail alternative options for customers other than an SRB agreement (for example re-mortgaging, selling on the open market etc.)
The FCA's press release appears to have emphasised that, notwithstanding a perceived shift in the government's attitude towards the regulator, it is still focussed on consumer protection. Mark Steward, the new director of enforcement and market oversight at the FCA commented that:
"This case highlights the importance of protecting consumers even when regulated financial services is only part of your business"