Our Guide to Equity Release Scams

Equity Tree guide to Equity Release scams
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Equity release is a perfectly legitimate scheme and potentially life-changing financial decision, which allows homeowners over the age of 55 to tap into the cash locked up in their homes.  

Unfortunately, scammers have clocked on to the gold rush, and are doing their best to cash in on the boom and they usually can as a cold call off the back of getting hold of your data.

Equity Release schemes, when entered into willingly and after plenty of research, it can be a brilliant way to make the most of your assets and boost income as you enter retirement.

Keep reading to get the full details on the Equity Release scams that are flouting about

As the UK’s over-55 population continues to balloon, so does the equity release market. Since 2010, the value of equity released from UK properties every year has increased nearly fourfold, from £945 million in 2009 to £3.92 billion in 2019.

Although the vast majority of equity release schemes in the UK are legitimate, you can help protect yourself and your loved ones from getting ripped off by reading about common scams- and some of the drawbacks of legitimate schemes which could leave an unpleasant taste in your mouth if overlooked before signing up.

Equity Release Scams

Most equity release ‘scammers’ are not peddling dodgy goods per se, but instead, pressure vulnerable homeowners into signing up for a scheme they don’t want or need.

This can end up costing the holder of the policy and their family tens of thousands of pounds due to their deals being uncompetitive, unregulated or just plain unsuitable for the customers they harassed into signing up.

These unscrupulous traders find potential victims’ personal information online, and use this to contact them. The victim is bombarded with calls from telesales employees until they finally give in and sign up to a scheme.

Scammers often get hold of these details after the victim unwittingly gave them up online- perhaps searching on an untrustworthy comparison site or equity release calculator. Such websites claim to compare the best deals on the market, but only display schemes provided by their partners, to whom they then sell the contact information input by the website’s visitors.

Equity Release Scams: You Contact Details

Others may sell visitor’s contact details to the highest bidder. What then follows is a series of aggressive, hard-sell marketing calls from salespeople who mislead potential customers by claiming to be ‘advisors’, when in fact they are telesales employees and are only interested in selling their scheme, regardless of whether it is the right decision for the customer.

Although these calls are usually pitched as a ‘free consultation’, if a customer signs up to a scheme, there will often be consultation fees rolled into the cost of taking it out.

To make matters worse, some of these dodgy dealers may claim to be regulated by the Financial Conduct Authority, when they are not. This means that they are not bound by the best practise obligations of legitimate Equity Release schemes, such as the ‘no negative equity‘ guarantee- which means that family could be left with debt at the end of the loan term.

Equity Release: How to Spot a Scammer

Equity release is a life-changing decision- often for all the right reasons. As with any significant financial decision, it is imperative to do your research first and discuss it with the people in your life who could be affected.

To protect yourself from scammers and unethical companies out to make a buck off vulnerable customers, you should be wary of the following:

  • Cold calls
  • Relentless phone calls pushing for a sale
  • A website which appears to be out of date
  • Any equity release provider who is not regulated by the Financial Conduct Authority, check the Financial Conduct Authority register
  • A salesperson or equity release adviser who seems to be in a rush to close a deal
  • Any company which says it deals with qualified advisers (rather than being qualified itself)

Equity Release: How Do I Check My Provider Is Legitimate?

All legitimate providers in the UK should be regulated by the Financial Conduct Authority. This is a regulatory body which sets minimum standards for the providers of equity release schemes and other financial products. It ensures that your provider adheres to certain minimum standards and behaviours designed to protect customers.

One example is the ‘no negative equity guarantee’ that all FCA-regulated lenders offer. This ensures that no matter how much interest your loan accrues, you can never owe more than the value of your home- meaning your family won’t be saddled with debt at the end of the loan term.  

If you ever have a dispute with an FCA-regulated lender, you can take report the issue to the Financial Ombudsman Service. The Ombudsman may be able to help you resolve your grievances without the expense of going to court. You can check whether the Financial Conduct Authority regulates your provider at www.fca.org.uk.

That said, it is not a legal requirement for lenders to join the FCA, and non-members may be perfectly legal.

Whether your lender is FCA regulated or not, you can always look for reviews of their services from other customers online. While one or two customers reporting with bad experiences may be the unfortunate reality of doing business, lots of negative reviews should be a warning to stay away and look for another provider.  

Equity Release: Things to Watch Out for Before You Sign Up to Equity Release

Although it has the potential to improve your quality of life significantly, equity release is a serious financial commitment that you should consider carefully before entering into.

If you don’t take the time to do your research, you could end up feeling short-changed further down the line, even if your scheme is legitimate.

According to the Financial Ombudsman Service, some of the most common complaints about equity release relate to unscrupulous traders talking vulnerable older adults into equity release or selling a scheme to people for whom it is not suitable.

However, after these complaints about potential scammers and dodgy dealers, the most common complaints related to early repayment fees and confusion over the status of the scheme after divorce or the death of a spouse.

Top 3 Reasons for Taking Out Equity Release

Home or Garden Improvements64%
Pay Debts31%
Go On Holiday29%

Debts People Clear Using Equity Release

Source of debtAverage cost per monthPercentage of Equity release customers using payments to clear debts
Mortgages£41245%
Credit Cards£39724%
Loans£30022%
Others£1045%
Overdrafts£453%
Source: Key Advice

These are features that are common to most equity release schemes and highlight how important it is to do your research, seek professional advice and discuss such an important financial decision with your loved ones.

How Can Equity Tree Help?

Here at Equity Tree, we have partnered with some of the UK’s leading Equity Release broker companies.

They have already helped thousands of people release equity already, and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these equity release companies, click on the below and answer the questions.

Len Burgess
Len Burgess
Len Burgess is a successful digital entrepreneur and founder of LBLK Publishing which specialises in Financial content. Len has been writing professionally on financial and business topics for 5 years before starting Equity Tree.
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