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Call to regulate home equity release products

Although proposals for a code of conduct around home equity release schemes is developing, one player wants regulation.

Thursday, September 21st 2006, 6:26AM

by Maria Scott

The Government announced last year that it planned to develop a Code of Practice aimed at protecting elderly people from the risks that might be associated with home equity release products, however one player is calling for regulation already.

Darryl Queen, managing director of Property Finance Securities, a Christchurch-based lender which markets the Lifestyle Security equity release product said he was disappointed with slow progress on the development of regulation in the market.

Queen said regulation was urgently required to protect people because new products were reaching the market that could be highly risky. He said he had seen loans that compounded interest every two weeks, so the debt owed by an elderly person would grow rapidly. Some also had features that might result in elderly borrowers being forced out of their homes prematurely to repay lenders.

There have been moves in the equity release industry to set up a voluntary code of conduct but Queen said the industry should be regulated so that all companies are policed.

“The rogue operator is not going to be joining industry associations,” he said.

The Office for Senior Citizens began consultation this month with agencies on a draft mandatory code and will release a discussion document for public consultation in the next few weeks.

A spokeswoman for the Office of Senior Citizens said the Government office was on track to complete proposals for a code by the middle of next year. This had always been the timetable. "Any mandatory code will require legislative change and that will be a decision made by ministers."

« KiwiSaver threatens regular savings schemesSovereign takes regulation bull by the horns »

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