Can equity release be a target for fraudsters?

As with any matter involving large sums of money there is a potential risk of fraud.  With equity release, it is not so much lenders as borrowers who may be at risk – and this means that advisers and providers may need to ask different sorts of questions in order to protect their customers and their investment

Fraudulent activity can take many forms: here are some examples which you as a consumer should be mindful of:

  • Coercion: an unscrupulous person – who, sadly, may be a trusted friend or even a family member – may see an opportunity to get some money for themselves by persuading someone with an equity release plan to release funds and give the money to them.
  • Fraudulent application: may be made by someone close to a customer – a friend, family member or possibly even a carer – by forging application papers and signatures.
  • “Romance” scams: where the customer is contacted by someone who appears very attractive to them – both physically and in terms of their compatibility.  The fraudsters will send photos and clever messages and will quickly develop a relationship with their victims, in many cases promising companionship and love.  They will then play on their victim’s belief in their existence and generosity –and start asking for money.  In most cases – they don’t exist at all.
  • Investment scams: where the fraudsters target people who they know own their own properties and may therefore be persuaded to borrow money from any source including an equity release plan – and then “invest” the cash released in an investment “plan” proposed by the fraudster, who will promise excellent returns on the investment.  Needless to say, the fraudster generally disappears with the cash, never to be seen again.  The general rule with this type of scam is that if it sounds too good to be true – it almost certainly is.  Our rules specifically require equity release advisers to explain to customers that it is inadvisable that the funds released are reinvested in any medium or long-term investments.

Our members work hard to reduce the risk that a customer may be being targeted fraudulently.  Advisers need to understand their customers’ needs, objectives and future plans when advising them on a suitable equity release product – and if they think something doesn’t stack up – and that the customer may be at risk – they will ask more questions.

We also require all customers to be given independent legal advice when they are about to enter into their equity release contract.  A solicitor will meet the customer face-to-face – and verify that the customer understands what they are being asked to sign up to and that there are no obvious signs of them being put under pressure by someone else.