MCOB 2.2 Communications
Purpose
The purpose of MCOB 2.2 is to restate, in slightly amended form, and as a separate rule, the part of Principle 7 (Communications with clients) that relates to communication of information. This enables a customer, who is a private person, to bring an action for damages under section 150 (Contravention of rules) of the Act to recover loss resulting from a firm that carries on the activities referred to in MCOB 2.1.3 R communicating information, in the course of those activities, in a way that is not clear or fair, or that is misleading. MCOB 2.2 also clarifies the expectations of the FSA where any rule requires the provision of information and there are two or more customers.
General
In many circumstances there will be two or more customers under any regulated mortgage contract, or two or more prospective customers looking to enter into the same regulated mortgage contract. In such circumstances, where a rule in MCOB requires the provision of information to such customers and the customers have different addresses, a firm sending out this information should send it to each address. If the customers share the same address it will be sufficient to send a single copy of the information addressed to each of the customers.
Prescribed terms
In any communication to a customer, a firm must:
- (1)
describe any early repayment charge as an 'early repayment charge' and not use any other expression to describe such charges;
- (2)
describe any higher lending charge as a 'higher lending charge' and not use any other expression to describe such charges; and
- (3)
describe any regulated lifetime mortgage contract as a 'lifetime mortgage' and not use any other expression to describe such a mortgage. 1
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Related investment advice
Firms are reminded that they should follow the relevant rules in COB 5 and COB 6 relating to advice and disclosure on investments if they are advising the customer on an investment such as an annuity linked to a regulated lifetime mortgage contract or an ISA used as a repayment vehicle.21
Clear, fair and not misleading communications
- (1)
When a firm communicates information to a customer, it must take reasonable steps to communicate in a way that is clear, fair and not misleading. 1
- (2)
Paragraph (1) does not apply to a firm when it communicates a qualifying credit promotion in circumstances in which MCOB 3 (Financial promotion) applies to the firm.1
When considering how to comply with the requirements of MCOB 2.2.6 R, a firm should have regard to the customer's knowledge of the regulated mortgage contract to which the information relates.
MCOB 2.2.6 R covers all communications with customers, for example any oral or written statements, telephone calls and any correspondence which is not a qualifying credit promotion to which MCOB 3 (Financial promotion) applies. In respect of qualifying credit promotions firms should note the separate requirements of MCOB 3.
Prominence of relevant information can play a key role in ensuring that a communication is clear, fair and not misleading. Where this is the case, the firm should consider prominence in the context of the communication as a whole. Use can be made of the positioning of text, background and text colour and type size to ensure that specified information meets the requirements of MCOB.