I support this amendment from my noble friend Lady Greengross because, as she has outlined, a lot of people have the majority of their wealth tied up in their property. The current equity release schemes are much more flexible than they used to be and contain a variety of safeguards. The Equity Release Council’s statement of principle, by which all the council members must abide, mandates that all equity release customers must receive independent financial advice. Can the Minister clarify whether all equity release schemes will fall under the FCA? I understand that currently it is only those from members who are part of the Equity Release Council, which means that we will potentially have twin-track standards going on for the customer.
The requirement for a solicitor to sign off the arrangement becomes particularly important when we look at the issues around mental capacity and coercion.
When I was at the Equity Release Council’s annual meeting, I was quite shocked to hear from one person there who had been negotiating equity release with a client. She had a suspicion that something did not quite seem right and decided to visit the client without the client’s son present, at which point the client said, “I don’t really want to do this at all. My son’s pushing me to do it”. She had the sense to say, “That’s very simple. I am refusing the equity release, and I will write to you”, and she tore up the forms there and then.
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The difficulty that we face all the time is that people get coerced and pressured by their family. There is a lot of evidence of that. It is extremely difficult to detect, and it is that one-to-one encounter with the client that gives the gut feeling that something is not quite right. When the person who is managing or selling the scheme acts on that gut feeling, they will reveal if there has been a problem. By having an independent solicitor to advise, we are building in the safeguard of somebody else looking at it, being able to assess the client and having some experience of assessing capacity for that decision at that time, which is what is required under the Mental Capacity Act. That will also allow people who are depressed or have fluctuating capacity to be detected. Somebody from the finance sector may have very little true training. Although the Equity Release Council is addressing vulnerability very well, I am concerned that in some of the schemes that are not part of the council the people dealing with them do not understand that the prerequisite for offering the product is to have separate legal representation.
Has there been any consideration of exit charges and their appropriateness and of whether the transparency of scheme exit charges will fall under the new guidance and will therefore be transparent and comparable? There can be a problem if somebody signs up to one of these schemes, circumstances change and they wish to withdraw from the scheme; in the past they have been hit by fairly punitive exit charges. I would be concerned if that oversight is not rolled up into the new body.