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FSA proposes new regulations for Islamic mortgages

The Financial Services Authority (FSA) plans to regulate Islamic financial services with some of its new proposals
    /24-7PressRelease/ - LONDON, UK, May 04, 2006 - (seek.uk) The Financial Services Authority (FSA) plans to regulate Islamic financial services with some of its new proposals. The proposal includes the future regulation of Home Reversion plans (HRs) and Home Purchase plans (HPPs) that are also known as Islamic mortgages.

HRs are a kind of equity release product, involving sale and lease arrangements generally aimed at older homeowners. These products help older homeowners to benefit from the value of their homes without having to move out of them. HPPs also involves sale and lease arrangements and is acceptable under the Islamic law.

The new regulations may be effective spring 2007. The FSA proposal covers rules on disclosure, sales practices and complaints management and consumer advice.

Dan Waters, FSA Director of Retail Policy, said that regulation of these sale and lease arrangements represents an important new development for the FSA and for consumers in the UK. It allows us to deliver a level consumer protection playing field with products designed for similar purposes. It also builds on the work that we have already done in the field of Islamic financial services, to improve consumer access to these products. Waters further added that the Authority was working to promote wider public understanding of both of these products as part of the consumer education objective.

Expert opinion: The proposed regulations by the FSA seeks to deliver a level consumer protection playing field in case of Islamic mortgages. The proposed proposals also take into account the present relatively small size of the HRs and HPPs market.
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