July 11, 2019

Standards Board Nominations and Updates

Nominations to the Standards Board for 2017/18

Nominations are invited from the membership for representatives to the Standards Board for 2017/18.  As in previous years, nominations are invited for each of the four core consumer facing categories of Council membership – provider, adviser, solicitor and surveyor.  Nomination forms,  which can be accessed by following this link (member login required), should be accompanied by CVs and brief statements supporting those nominated, and sent to the Standards Officer ([email protected]) by close of play on Friday 17th February or sent by post to The Equity Release Council, 3rd Floor, Bush House, North West Wing, Aldwych, London, WC2B 4PJ.

The Standards Board will consider the nominations received at its meeting on 1st March, following which the Chairman and Chief Operating Officer will make recommendations to the Main Board meeting on 16th March.  The first meeting of the newly-constituted Standards Board will be on 11thMay 2017.

Amendment to the Adviser Checklist

Following a period of consultation and having taken on board feedback from members, the Standards Board has agreed to amend the wording of Point 8 of the Checklist for Advisers, which appears as Appendix C to the Council’s Rules and Guidance.  Members agreed that the existing wording, which reads: “Have you explained clearly that it is inadvisable that the funds released are reinvested into any medium or long-term investments?” may not be in line with the wider advice being given in the light of the recent pensions reforms.  The following revised wording has therefore been agreed: “Have you explained that reinvesting the money released is unlikely to generate returns that will offset the cost of the equity release plan, but if the customer/client is considering it, they should seek advice from a suitably qualified and authorised investment adviser.” The new wording is now available on the website.

Working Group on the KFI

As reported in the last edition of the Newsletter, the Standards Board has started work on producing a “wish list” for changes to the KFI.  A Working Group, chaired by Chris Buchanan of Legal & General Home Finance, met for the first time in December, and will be continuing its work over the next few months.  The FCA has indicated that it would be receptive to suggestions for change, particularly if these have the clear support of the industry.  A second meeting has been scheduled and we will continue to update members on the progress of the working party.

Presentation of interest rates and solicitors’ costs

From time to time, issues are raised by members for consideration by the Standards Board or in other discussions, such as at General Council meetings.  The Council welcomes such input from members.  A couple of issues were raised again at the most recent Standards Board meeting, and we should like to take this opportunity to explain our response to all members.

The first such issue relates to firms’ presentation of interest rates in their KFIs.  It has been suggested that the Council should require all provider members to show either a monthly (MER) orannual (AER) rate in the KFI.  The FCA’s MCOB rules governing the content of the KFI allow lenders to specify the frequency of their interest calculation.  The Standards Board looked at this in November 2015 and again in September 2016.  Whilst Standards Board members had some sympathy with the arguments in favour of transparency and consistency, they did not think that there was sufficient concern amongst the wider Council membership to justify requiring a change which would have systems implications for a number of members.  Adviser members confirmed they had access to other tools that allowed them to make comparisons between interest rates.  In addition, there was no consumer detriment caused by providers illustrating either monthly or annual rates, although this usually required some explanation by the adviser.  The Standards Board had therefore decided, in 2015 and 2016, not to take any further action – and were not aware that any new evidence had arisen in recent months which should cause them to change that view.  The position is therefore that the Standards Board does not intend to recommend or require lenders to adopt either a monthly or an annual interest date calculation in their KFIs.

The second issue related to the presentation of solicitors’ fees in KFIs.  This is another issue which has been raised on a couple of previous occasions.  The concern surrounding this is that the figures quoted on KFIs are often unrealistically low, which results in customers receiving legal bills which are higher than they had initially been led to expect.  At our recent meeting, it was pointed out that the lawyers which provide customers with independent legal advice will always indicate what their fees are likely to be when they first engage with the customer.  This will, however, inevitably be some time after the KFI has been provided, since it must be given before the customer commits to making an application.  It will therefore always be difficult for lenders and advisers to give more than a rough estimate of what the final legal fees will be – and the Standards Board questioned whether it made sense for any figure to be quoted.  Members considered that it would be more sensible simply to refer to the fact that fees would be payable, but not to attempt to quantify the likely amount.  It was also pointed out that it would be better to quote the actual amount in the Suitability Letter which the adviser provides to the customer – since by that stage in the process, the figure is likely to be known.   It was agreed that this point should be fed into the current discussions on possible amendments to the KFI which were being co-ordinated by the KFI Working Party (see above).

Revised Edition of the Rules & Guidance, Version 7 : summary of changes

  • Minor change to Rule 2.2 to reflect the fact that applications may be made online.
  • Guidance added to Rule 4.1(2)(b)(3) to clarify that providers must make clear when the NNEG does and does not apply.
  • Section 8 (independent legal advice) – revised in consultation with the Solicitor members of the Council.  Key changes are:
    • The text of the declaration made in the Solicitor’s Certificate is reproduced at the top of the section.
    • A new section (Independence of the advising Solicitor) clarifies what is meant by “independence.”
    • Text has been added to deal with circumstances where an Attorney is acting on the customers behalf.
    • Clarification of the wording on payment of marketing costs (8.3).
    • Guidance added (after Rule 8.4) to the effect that the Solicitor who meets the customer face-to-face would not normally expect anyone else to be present, expect in acceptable circumstances
    • Guidance added (after Rule 8.7) to highlight the existing MCOB Rule that if a customer with a home reversion wishes to release further equity, this must be treated as a new plan.  Under the Council’s rules, further independent legal advice must therefore also be given.
  • The 6 versions of the Solicitor’s Certificates have been consolidated into one, which now appears as Appendix D.
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