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Equity Release Schemes

: I think that that specific issue would be better examined in the context of the introduction of the regulations and rules, rather than in this general debate. However, the hon. Gentleman raised several more general points, to which I can respond. The first point was about shared appreciation mortgages. I understand the concern arising from the particular cases that the hon. Gentleman cited. All MPs come across such constituents, and they—and certainly Ministers—have every sympathy for consumers who find themselves in financial difficulties having taken out a shared appreciation mortgage. Consumers can access the Financial Ombudsman Service if they feel that they have been badly advised about the mortgage or that it was mis-sold to them. However, the financial ombudsman has not to date found any evidence of mis-selling, and in those circumstances it is difficult to see that there are any grounds for compensation, let alone for the Government to step in and accept some sort of responsibility for compensation. The hon. Gentleman then turned his attention to property investment clubs. Regulation to deal with collective investment schemes is already in place. In the light of concerns about the activities of property investment clubs, the FSA has reviewed what it calls its perimeter guidance. In general terms and in principle, the Government do not believe that it is appropriate for the FSA to regulate property purchase; that is a very different matter from the financial services regulation that it was specifically set up to deal with. However, the FSA's clarification of the perimeter has made it clear that some schemes that have previously regarded themselves as unregulated might need to be regulated by the FSA. The hon. Gentleman also raised the question of the provision of free money advice. He may not be aware that only last week the FSA launched, jointly with the BBC, an online advice tool designed to help consumers by offering good advice on financial services. The FSA's more general financial capability work is now looking into what might need to be done further. In addition, the Chancellor—the hon. Gentleman will remember this, because he was shadowing the Chancellor at the time—announced in the 2004 pre-Budget report a £120 million financial inclusion fund, part of which goes towards supporting the development and provision of free face-to-face money advice through providers such as citizens advice bureaux, which the hon. Gentleman mentioned. That leads me directly on to the contribution of the hon. Member for Fareham (Mr. Hoban). He began by stressing the importance of good financial literacy and understanding by consumers. I hope that he welcomes the moves that we have made and the investment we have put into financial literacy and money advice for consumers. He also stressed the fact that there is a legitimate demand for equity release schemes, and in a reflective contribution he helped to set the broader context for some of the specific issues that have cropped up. He urged us to bear in mind the interests that our constituents have in these financial products and their potential, and emphasised that they help to provide income for some people in retirement. He also rightly said that there is a need for regulation, but that we must also regulate in order to meet the aspirations of our constituents and potential consumers. Regulation has been the crux of the debate. Regulation is not intended to discourage the sale of such products. Instead, our approach is to enable people to make informed choices, to offer necessary consumer protection, and to ensure that there is a competitive level playing field in the equity release market. I was prepared to set out a degree of detail and background for equity release products and the development of regulation in this field, but the participants in the debate are probably far better informed than many other Members. Therefore, suffice it to say that there are two basic types of scheme: mortgage-based schemes or lifetime mortgages, and reversion plans. The difference between them is clear: in mortgage-based schemes the householder retains ownership of the property, whereas in reversion plans the reversion provider becomes the owner of whatever proportion of the property is sold. Mortgage-based equity release schemes have been regulated by the FSA since 2004. However, home reversion plans are not currently regulated by the FSA, as they are, effectively, transactions in land and are therefore not covered by the Financial Services and Markets Act 2000. However, the Government fully accepted the case that such schemes needed to be regulated to help people to make informed choices, to offer proper and valuable consumer protection, and to make sure that there is a competitive and fair market in these products. As I have said, home reversion plans are not currently regulated by the FSA, but that is not to say that purchasers of such plans are completely without protection. The home reversion market is subject to voluntary regulation through the SHIP group. Members of SHIP agree to comply with the code of practice and to undertake a fair, simple and complete presentation of any plan that they offer. Crucially, they also offer a guarantee that consumers will never owe a lender more than the value of their home; in other words, they give a ““no negative equity”” guarantee. Clearly, those protections are a long way short of the protection offered by statutory regulation and by the FSA's more general regime.