Mis-Sold Equity Release: Compensation Claims

Mis-sold equity release happens when an equity release customer signs up to get a loan without understanding the scheme.

This can have devastating consequences, as it is difficult to come out of equity release once you have taken the money out of your home.

Mis-sold equity release doesn’t always mean a customer has been lied to about how the scheme works.

There are many examples of how they can be misinformed, including:

• Not being told about the disadvantages of equity release
• Being encouraged to choose an equity release plan that isn’t suitable
• Not being informed of the alternatives to equity release
• Not receiving a personalised illustration
• Being pushed to release equity despite not being able to afford it
• Feeling pressured to make a decision to release equity on the first meeting

Most victims of mis-sold equity release can trace the issues back to the advice meetings.

Their adviser may have offered biased advice, failed to explain the key impacts of equity release (e.g., the impact on inheritance), or pressured the client to make a quick decision.

However, this can also occur at a later stage of the equity release process. For example, a customer may be quoted an equity release price by a lender, only for the lender to ask for a higher price further down the line.

How to Avoid Mis-Sold Equity Release Schemes

Working with regulated individuals and companies is the only way to definitively avoid equity release financial mis-selling.

When you are dealing with regulated bodies, you will be well-informed on equity release right from your first advice appointment.

The adviser is obligated to tell you the pros and cons of equity release, the various potential impacts, and how it would affect you in terms of your personal financial circumstances.

Regulated advisers can also be reported to the regulatory body if their advice doesn’t follow the rules and principles. This puts customers in a secure position if they need to make a complaint, as there will be a clear complaints process to follow.

When looking for a regulated adviser, solicitor or equity release provider, keep an eye out for the following regulatory companies:

• Law Society of Scotland
• Equity Release Council
• HM Land Registry
• Financial Ombudsman Service
• Financial Vulnerability Taskforce
• Law Society of England and Wales

It’s also advised to speak to your loved ones before releasing equity. There is a higher risk of falling victim to a mis-sold equity release scheme if you keep the decision to yourself, as your family will not be able to warn you of any signs of a scam.

Making a Compensation Claim for Mis-Sold Equity Release

Customers are advised to complain to their lender and regulatory body about a mis-sold equity release within six years.

If the customer hasn’t been aware of the issue, they should make a complaint no later than 3 years after they found out. Claims for compensation made after this time limit may not be investigated.

The first port of call for a victim of a mis-sold equity release scheme is the equity release company. This is because some complaints can be resolved informally rather than having to be escalated to a regulator.

For customers who have already tried this, the next course of action is to contact a trustworthy equity release regulatory body. There will be an initial assessment, during which you will need to inform them that you have already tried to resolve the complaint informally.

The regulator will decide whether to pursue the claim based on whether it is a valid equity release compensation claim.

Valid claims are then investigated by the equity release company and the regulatory body in question. As the customer, you will be asked to provide evidence of a mis-sold scheme. The lender will also have to submit evidence.

Finally, compensation is awarded for successful claims. Unsuccessful claims can be appealed, but there is no guarantee that the regulator will change their decision.

How Much Can I Claim for Mis-Sold Equity Release?

There is no set amount of money you can claim for mis-sold equity release, as the financial impact is different for each customer.

Usually, you can expect to receive enough funds to return to your former financial position. This means you would have the same amount of money as you did before you released equity.

What is the Impact of Mis-Sold Equity Release Schemes?

When people release equity unsafely, it can permanently affect their life. As most equity release customers are retired or heading for retirement, meaning they don’t have the security of a monthly income from work, this can be very harmful.

Possible negative effects on the customer’s life include:

• Not having enough money to pass on as inheritance
• Struggling to exit the equity release scheme due to the high early repayment charges
• Owing a huge amount of interest to the equity release lender
• No longer having suitable plans for long-term care
• Losing their home (if a home reversion plan was purchased)

How Can I Stop My Parents from Getting a Mis-Sold Equity Release Scheme?

Unfortunately, numerous pensioners get drawn into compelling equity release schemes, only to become victims of mis-sold equity release (1).

If your parents are interested in equity release, try to have an open conversation about their plans. If they are happy for you to know the details, you could help them to avoid risky scenarios e.g., unregulated lenders or unsuitable plans.

You cannot stop your parents from getting equity release, as it is the homeowner’s decision. However, you can do your best to steer them in the direction of safe equity release where possible.

It may help to speak to an equity release adviser together, do online research, and find stories of people who were conned by equity release companies. You could also identify positive stories, where customers have pursued safe equity release and reaped the benefits.

Get Impartial Advice Today

If you haven’t yet released equity, we hope you recognise how important it is to seek unbiased advice. This is the best way to avoid getting caught up in an unreliable equity release scheme.

Contact us today at 0330 058 1579 to learn about equity release from a neutral advice company. Whether you want to know what equity release is or how you can protect yourself against scams, we are here to help.

References

[1] Homeowners ‘misled’ on equity release loans, regulator warns https://www.telegraph.co.uk/money/property/mortgages/equity-release-loans-homeowners-mortgage-property/