The Government-funded National Information Centre on Retirement Investments (NICRI) has called on the Federal Government to fund an equity release information centre to provide general financial and legal advice to consumers seeking to access an equity release product such as a reverse mortgage.
NICRI chief executive Wendy Schilg said the service was an important consumer protection measure that would help retirees and pre-retirees avoid any traps and pitfalls that could arise from reverse mortgages.
“The ERIC model is designed to ensure [that] future reverse mortgage and equity release applicants [get] access to independent uniform advice — financial, legal and general,” she said.
“We would like to see the Government, under Phase II of the new Credit Regulations, make financial and legal advice compulsory for all borrowers of equity release products through an advice service such as ERIC.”
The service will ensure all prospective borrowers are able to make an informed decision regarding accessing equity.
The NICRI service currently takes about 500 to 600 calls per month and provides general information on topics ranging from financial planning to investment advice and superannuation advice.
“This new proposal would see NICRI’s current information service enlarged considerably with solicitors and financial advisors on hand to speak directly to prospective borrowers,” Schilg said.
“Issues of concern currently being seen within the industry would be recognised and dealt with before borrowers signed their contract — concerns such as undue family pressure, and misunderstandings with interest rates and default clauses.”
If the Government did not fully fund the advice service, Schilg proposed charging a levy from borrowers referred to NICRIS from lenders. Under this model, lenders will effectively be paying for the service but will also receive the legal advice that they would have to pay for anyway.
“Lenders are not responsible for the model, but some have shown support and their input is necessary. They are the ones who work with all the applicants, and it is also in their best interests that borrowers are well informed and protected,” Schilg said.
