The Financial Conduct Authority, also known as the FCA, is a financial regulatory body that operates independently of the government and helps to enforce consumer protection on equity release products.
What does the FCA do?
The FCA has three main functions; to enhance the integrity of the UK financial market, they promote competition between financial companies and to protect consumers. This is all to ensure that all consumers that are considering financial products have consumer protection and confidence that financial companies will treat them fairly.
The FCA performs this role in three different ways.
First, they authorise individuals and firms involved in the financial market, acting as a regulator and choosing who is and isn’t authorised to offer equity release products based on their strict requirements.
Secondly, they will focus on supervising financial firms to ensure that they are not harming the market or customers. The FCA supervises around 58,000 different firms that vary in size and complexity, taking feedback from many different sources to use as a basis for their information.
Lastly, the FCA also enforces the rules and will take actions that range from going to court to withdrawing a firm’s authorisation. Fines can also be issued by the FCA should a firm breach laws regarding market abuse, competition laws or fail to protect consumers. In 2018, the FCA collected a total of £60.4 million in fines and in Q1 and Q2 of 2019, they have collected £272.8 million so far, with a huge £102.2 million fine against Standard Chartered Bank for Anti-Money Laundering breaches.
The no-negative equity guarantee on equity release
One of the main functions of the FCA is to enforce the no-negative equity guarantee on equity release. Previously, people that considered equity release were concerned about the possibility of negative equity. As interest on an equity release scheme would continue to rise especially if you live a long and comfortable life, there was always the possibility that your beneficiary would need to cover the interest when you moved into long-term home care or passed away as the value of your estate would not be enough.
However, the FCA regulates the equity release standards that the Equity Release Council has set. This is known as the no-negative equity guarantee on equity release, meaning the borrower will never owe more than the value of their property. This promise must be offered by lenders and if they are to break that promise, customers will have the FCA on their side to enforce consumer protection.
At Equity Release South-East, we pledge to all of our clients that they will be protected by the no-negative equity guarantee on equity release. This means that if you do take out an equity release with us, the accumulated interest and repayment will never exceed the value of your property. This means you can have peace of mind knowing that your beneficiary will not need to pay out of their own pocket to cover for your interest, and you can take out an equity release scheme in confidence.