The FSA is warning consumers to beware a ‘no cost' property income plan which permits an insurance company to take a legal charge on policyholders' homes.
Promotional material seen by the regulator claims the product - called Crossroads and offered by Asset Income Plan Ltd - pays homeowners an annual income of 5% based on 50% of the value of their property for a set period of time, usually three or ten years.
To qualify for the income, however, homeowners must allow an insurance company to take a legal charge on their property up to a maximum of 50% of its value.
The FSA says consumers need to be aware that when a firm has a legal charge on a home, it means they have rights over the property.
The product information states the only risk a consumer has of being forced to sell their home is if the insurance company became insolvent, and that this is reduced because the product is covered by capital risk insurance.
"It is not clear if this is correct and whatever steps may be taken to reduce the likelihood of the firm carrying this out, your home may still be at risk," the FSA states.
Crossroads is not regulated under the FSA's rules, meaning its advisers and providers do not need to be authorised.
This means consumers will not be covered under the FSCS or be able to take their claim to the FOS.
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First mentioned in Cridland Report