Consumer Panel makes case for development of tools and guidance for later life lending

The Financial Services Consumer Panel has published new research which looks at the experiences of consumers as they choose and buy equity release (ER).

The research shows that without comprehensive tools and guidance, there is a risk that consumers will not make a fully informed decision that is right for their circumstances.

As a result, in a position paper also published today, the Panel has asked the FCA to support the development of holistic tools and guidance provided by independent bodies, such as MaPS, with the aim of helping people understand and narrow down a broad range of later life lending options and approach the regulated market better able to pursue their objectives.

The Panel commissioned in-depth qualitative research to explore the ER market from the perspective of consumers who purchase from a position of vulnerability.

The secondary objective was to explore the role of regulated advice in securing a good outcome for particular borrowers.

The research was informed by a wide range of sources and data. The most significant element was new independent qualitative research with consumers.

The findings indicated that the current sales and advice process does not always prevent consumers from experiencing poor outcomes, including regrets and misunderstandings about their purchase.

The findings suggested that consumers who purchase from a position of vulnerability may fail to consider the long-term implications.

Panel chair, Wanda Goldwag, said: “It is important that consumers, especially vulnerable consumers, are being offered products that suit their needs and are being offered appropriate tools and guidance to ensure they understand the options available to them.

“The Panel’s work sets out where the FCA and industry can work together to build on improvements already made in this market.

“There’s work to do to consider the development of effective tools and guidance for later life lending, on whether the financial promotions regime is working as intended, and on meeting the higher expectations for consumer outcomes enshrined in the proposed new consumer duty.”

Andrew Gething, managing director at MorganAsh, added: “This research highlights some important issues for the later life lending market, and how they implement strategies for vulnerable customers in order to meet FCA regulations and do best by the customer.

“It is important to understand the consumer’s characteristics and vulnerabilities at the point of sale, to ensure that best advice is given and the transaction is appropriate. 

This raises the need for a systematic way to screen all applicants for products, as part of the advice process.  Many in the industry are only looking at vulnerability when it is highlighted to them, from existing customers, whereas every customer really needs to be screened in this way and right at the start of the process.

“The FCA’s consumer panel encourages the use of tools – and indeed there is a growing need to collate, assess and store data on customer vulnerability in a systematic and objective manner.

“The flaw in the FCAs research is the limited sample size of only 45 interviews, comprised of people who were paid for their time, as this is not truly representative.

“However, the research remains valid and this calls for the industry to collate far better data on vulnerability and consumer outcomes. This means the systematic recording and objective assessments of consumer characteristics as well as outcomes, in order to provide reliable data for all parties and fundamentally ensure that the customer is always given the right advice and provided with the right product for their needs.”

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