Elderly homeowners are at risk of being mis-sold home reversion products by companies that are unregulated, the Irish Financial Services Regulatory Authority warned yesterday.
The financial regulator told the Joint Oireachtas Committee on Finance and Public Service that it did not regulate a type of equity release product known as home reversion schemes, where elderly and retired consumers sell part of their home in return for cash.
"This is not a financial product - it is the sale of property and therefore is not regulated by us," said Liam O'Reilly, the financial regulator's outgoing chief executive. Mr O'Reilly said the regulator would support an amendment to the legislation that would require the products and their providers to be regulated.
Home reversion schemes are sold in the Republic by two companies, Residential Reversions Limited (RRL) and the Shared Home Investment Company (Ship).
The companies buy a share in an elderly person's property for a lump sum which usually works out as less than the market value of the share. The person or couple retains the right to live in the property until they die or permanently move out.
Some of the suggested uses for the lump sum include medical care, day-to-day living expenses, holidays, home improvements and gifts to children. But the risk is that homeowners may sell valuable assets that they might later need to pay for nursing home care and medical expenses over an extended period of time.
Joan Burton, Labour Party spokeswoman on finance, said huge numbers of advertisements for equity release schemes were being directed at elderly people who might be on the cusp of requiring nursing home care.
"It is essential that information about these products is out there in the public domain," Ms Burton said, adding that consumers would need to be financial whizzes to work out some of the products' terms and conditions.
The financial regulator does regulate a different type of equity release scheme known as lifetime loans, where repayments do not have to be made until the person dies or moves away, or until the property is sold.
Under the regulator's new consumer protection code due to come into effect in July, the companies providing these loans will be obliged to outline to the customer the consequences of purchasing the product and to make aware the importance of seeking independent legal advice.
