FCA fines sale and rent back firm
In addition, the FCA has publically censured Steven James Martin, director at Quick Purchase and its only shareholder, for failing to exercise due skill, care and diligence in managing the business of Quick Purchase.
Quick Purchase has also agreed to pay redress totalling more than £200,000 to 11 of its customers who were affected by those failures and each SRB customer will also be offered a new assured short-hold tenancy at an affordable market rent fixed for three years.
From 14 July 2010 to 17 May 2011 Quick Purchase entered into 14 regulated SRB transactions, with customers.
An SRB transaction must be both appropriate and affordable to be suitable for the customer, but Quick Purchase permitted its customers to enter into SRB transactions without having reasonable grounds to be satisfied that the transaction was both affordable and appropriate for those customers.
This was in breach of the Mortgage Conduct of Business rules. Martin held the director and the money laundering reporting controlled functions at Quick Purchase. He was the only controlled function holder during the relevant period.
Of the 14 SRB transactions, 11 were either inappropriate, unaffordable or both.
The FCA regards these inappropriate and/or unaffordable sales as serious because they led to significant consumer detriment causing customers potentially to forgo between 29-38% of the equity in their homes.
Martin breached Statement of Principle 6, in managing the business of Quick Purchase in that it did not treat customers fairly.
Quick Purchase failed to keep records to show why these transactions were affordable. Quick Purchase also breached MCOB rules in that it failed to ensure in all cases that valuations for the purposes of the SRB transactions were carried out by a valuer owing a duty of care to the customer.
Quick Purchase is an authorised SRB provider. It describes itself as a specialist SRB buying company, enabling homeowners to stay in their house and rent it back.
It became authorised on 14 July 2010 to carry out sale and rent back activities. SRB transactions involve individuals selling their home at a discount in return for the right to remain in their property as a tenant for a set period, typically on an assured shorthold tenancy.
The individuals tend to be facing repossession or other serious financial difficulties. The principal reason for most customers to enter into an SRB scheme is to allow them to remain living in their houses for an agreed period of time, which they would have been unable to do if they were to sell their properties in the open market.
The regulated SRB transactions formed only a small part of Quick Purchase’s wider property and letting business which is not regulated by the FCA.
The outcome of this case emphasises the important message to firms that even where regulated business is secondary to their main business activity they and their senior managers, must nevertheless ensure that they comply with the requirements of the regulatory regime.
Mark Steward, director of enforcement and market oversight at the Financial Conduct Authority, said: “This case highlights the importance of protecting consumers even when regulated financial services is only part of your business.
“The regulations which govern sale and rent-back are designed to protect customers in financial difficulty and to guard them from unsuitable deals.
“The extensive redress package which we have asked Quick Purchase to implement will address the detriment Quick Purchase’s customers have suffered.”