A sale and rent back arranger has been banned and fined nearly £1m by the regulator for misleading vulnerable customers for his own personal gain.
The Financial Conduct Authority (FCA) has issued the largest ever fine for a sole trader in a retail business to Birmingham-based Gurpreet Singh Chadda after it uncovered “significant failings” when conducting sale and rent back agreements.
Chadda, who traded under the names Red2Black Homes and B&L Homes, was investigated by the FCA for his involvement in seven sale and rent back transactions between June 2009 and January 2010.
He has been banned from working in the financial services sector and ordered to pay £945,277.
Sale and rent back agreements are typically used by individuals in financial trouble, who sell their property and rent it back from the arranger in order to continue living in their home.
Among the “widespread failings” identified by the regulator, Chadda falsely claimed that the price the sellers would get for their properties was based on an independent valuation, when some were based on his own opinions, and misled sellers about the value of their homes.
He was found to have told his customers, the sellers, that he would be buying their homes when, in fact, the purchasers were other people who were not authorised or regulated by the FCA.
He then helped the purchasers to obtain mortgages in the knowledge that they were giving misleading information to mortgage lenders.
Chadda also charged the sellers “grossly unfair and excessive” hidden fees.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “Chadda’s misconduct is the most shocking we have seen from a home finance arranger. He is a disgrace to financial services.
“He deliberately misled his clients for his own personal gain and then repeatedly and cynically lied to the FCA. Chadda is not fit to work in regulated financial services and he presents a serious risk to customers and lenders alike with his dishonest and unscrupulous actions.”
While the sellers of the properties expected to get a discounted price for their properties, they were not aware that Chadda was receiving the full amount for the houses from the purchasers.
In three cases, the sellers received less than half the value of their property, and in two of these cases they only received 38% of the sale price.
The FCA calculated that Chadda clocked up £695,277 from the seven deals as a result of his misconduct.