This chapter applies to a firm in a category listed in column (1) of the table in MCOB 2.1.2 R in accordance with column (2) of that table.

This chapter applies in relation to:

1. (1)

   home finance activities;1

   1
2. (1A)

   to4 the extent specified in MCOB 2.1.2 R, regulated sale and rent back activity;3

   4
3. (2)

   those activities in MCOB 12 and MCOB 13 that are carried on after a regulated mortgage contract or home purchase plan1 has come to an end following the sale of a repossessed property, and those activities in MCOB 12 that are carried on after a home reversion plan has ended for any reason1; and

4. (3)

   the communication or approval of a financial promotion of qualifying credit, of a home purchase plan,4 of a home reversion plan1 or of a regulated sale and rent back agreement.4

   14

A firm must take reasonable steps to ensure that it, and any person acting on its behalf, does not:

1. (1)

   offer, give, solicit or accept an inducement; or

2. (2)

   direct or refer any actual or potential business in relation to a regulated mortgage contract,3home reversion plan2 or regulated sale and rent back agreement3 to another person on its own initiative or on the instructions of an associate;

   3

if it is likely to conflict to a material extent with any duty that the firm owes to its customers in connection with such a home finance transaction2 or any duty which such a recipient firm owes to its customers in connection with such a home finance transaction.2

1. (1)

   A firm must not operate a system of giving or offering inducements to a mortgage intermediary, reversion intermediary,2SRB intermediary3 or any other third party whereby the value of the inducement increases if the intermediary2 or third party, such as a packager, exceeds a target set for the amount of business referred (for example, a volume override).

   2
2. (2)

   A firm must not solicit or accept an inducement whereby the value of the inducement increases if the firm exceeds a target set for the amount of business referred. 1

1. (1)

   A mortgage lender,3reversion provider2 or SRB agreement provider3 must quantify, in cash terms, any material inducement it offers to a mortgage intermediary, reversion intermediary,2SRB intermediary3 or a third party.

   3
2. (2)

   In quantifying the value of the material inducement, the firm must include any subsequent payments (such as a trail fee) made where the customer continues with the samehome finance transaction.2

   2

A firm will be taken to be in compliance with any rule in MCOB that requires a firm to obtain information to the extent that the firm can show that it was reasonable for it to rely on information provided to it by another person.

1. (1)

   Any information which a rule in MCOB requires to be sent to a customer may be sent to another person on the instruction of the customer, so long as the recipient is not connected with the firm.

2. (2)

   There is no need for a firm to send information to a customer where it has taken reasonable steps to establish that this has been or will be supplied by another person.

1A firm must act honestly, fairly and professionally in accordance with the best interests of its customer.

A firm must not, in any written or oral communication, seek to exclude or restrict, or to rely on any exclusion or restriction of, any duty or liability it may have to a customer under the regulatory system.

A firm must not, in any written or oral communication to a customer, seek to exclude or restrict, or to rely on any exclusion or restriction of, any duty or liability not referred to in MCOB 2.6.2 R unless it is reasonable for it to do so.

5A mortgage lender may only include, or rely on, a term in a regulated mortgage contract which permits it to change the rate of interest from a fixed, discounted or other concessionary rate to the firm's standard variable rate in the event of a breach of contract if each of the following conditions is met:

1. (1)

   the breach of contract is material;

2. (2)

   the breach of contract is unrelated to a payment shortfall; and

3. (3)

   that standard variable rate is not an interest rate created especially for customers who are (either at all, or in particular ways) in breach of contract.

A firm must ensure that the interests of its customer under a home purchase plan, home reversion plan or regulated sale and rent back agreement2 are protected to a reasonable standard.

Unless it is satisfied on reasonable grounds based on the customer's knowledge, expertise and experience that it is unnecessary, a firm must obtain from its customer's legal adviser, before its customer enters into a home reversion plan, confirmation that:

1. (1)

   he has been instructed to ensure that the customer's legal rights under the plan are protected to a reasonable standard; and

2. (2)

   he has explained to the customer those aspects of the customer's legal rights and obligations under the home reversion plan that he needs to understand.

2A firm must ensure that before a SRB agreement seller enters into a regulated sale and rent back agreement, the SRB agreement seller is made aware of the availability and importance of independent legal or professional advice.

1. (1) 4

   When entering into a regulated sale and rent back agreement,5 a firm must ensure that, under the terms of the regulated sale and rent back agreement:

   5
   1. (a)

      the entitlement of the SRB agreement seller (or trust beneficiary or related person) to occupy the property is governed by a tenancy, which is structured:

      1. (i)

         if the property is in England and Wales, as an assured tenancy (including an assured shorthold tenancy) under the Housing Act 1988 (as amended);

      2. (ii)

         if the property is in Scotland, as an assured tenancy (including a short assured tenancy) under the Housing (Scotland) Act 1988, (as amended); and

      3. (iii)

         if the property is in Northern Ireland, as a private tenancy under the Private Tenancies (Northern Ireland) Order 2006;

   2. (b)

      the tenancy is for a fixed term of no less than five years;

   3. (c)

      the terms of the tenancy provide for the tenant to terminate the tenancy during the fixed term on no more than three months' notice (and with no other conditions attached); and

   4. (d)

      each of the terms of the tenancy is fair.

2. (2)

   When entering into a regulated sale and rent back agreement,5 a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in England and Wales, the terms of the tenancy do not:

   5
   1. (a)

      give the landlord power to determine the tenancy in certain circumstances as referred to in section 5(1) of the Housing Act 1988, as amended; or

   2. (b)

      otherwise make provision for the tenancy to be brought to an end by the landlord save on a ground or grounds for possession applicable for an assured tenancy under the Housing Act 1988, as amended; or

   3. (c)

      make provision for the tenancy to be brought to an end on any of Grounds 2, 6, 8 or 9 under the Housing Act 1988, as amended.

   A firm may not rely during the fixed term of the tenancy on any ground for possession of the property other than a ground for possession on which the terms of the tenancy may under this paragraph (2) make provision for the tenancy to be brought to an end by the landlord, and a firm may only rely on any ground for possession if it is fair for the firm to do so.

3. (3)

   When entering into a regulated sale and rent back agreement,5 a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in Scotland, the terms of the tenancy do not include:

   5
   1. (a)

      any provision for it to be brought to an end by the landlord during the fixed term other than a ground for possession applicable for an assured tenancy under the Housing (Scotland) Act 1988, as amended; or

   2. (b)

      Grounds 2, 6, 8 or 9 under the Housing (Scotland) Act 1988, (as amended).

   A firm may not rely during the fixed term of the tenancy on any ground for possession of the property other than the grounds permitted under this paragraph (3) to be included in the terms of the tenancy, and a firm may only rely on any ground for possession if it is fair for the firm to do so.

4. (4)

   When entering into a regulated sale and rent back agreement,5 a firm must ensure that, under the terms of the regulated sale and rent back agreement, if the property is in Northern Ireland, the terms of the tenancy do not include:

   5
   1. (a)

      any provision which would permit the landlord to forfeit the lease and obtain possession of the property during the fixed term unless the provision is equivalent to a ground for possession applicable for an assured tenancy under Schedule 2 to the Housing Act 1988, as amended, in England; or

   2. (b)

      any provision which would permit the landlord to forfeit the lease and obtain possession of the property on the basis that:

      1. (i)

         a mortgagee (or chargee) under a mortgage (or charge) entered into by the landlord requires vacant possession for the purposes of exercising a power of sale of the property; or

      2. (ii)

         the landlord intends to demolish or reconstruct, or carry out substantial works on, the property or any part of the property; or

      3. (iii)

         there are arrears of rent, unless the conditions applicable to either Ground 9 or Ground 10 under the Housing Act 1988, as amended, in England, are satisfied; or

      4. (iv)

         alternative accommodation is available for the tenant.

   A firm may not rely during the fixed term of the tenancy on any circumstance to forfeit the lease and obtain possession of the property other than the circumstances permitted under this paragraph (4) to be included in the tenancy agreement, and a firm may only rely on any circumstance if it is fair for the firm to do so.

5. (5)

   A firm must not take, or propose or threaten to take, any steps to evict the SRB agreement seller (or trust beneficiary or related person) other than by applying to the court for a possession order based on the grounds or circumstances, reliance on which is not prohibited by this rule, and enforcing that order in a lawful manner.

6. (6)

   Where a SRB agreement provider enters into or proposes to enter into (whether before or after the commencement of the tenancy) a mortgage (or charge or standard security) over the interest it obtains under a regulated sale and rent back agreement, the firm must ensure that the mortgagee (or chargee or security holder) has agreed in writing to the proposed letting under the agreement, and to the terms of the agreement. The firm must provide to the SRB agreement seller a copy of the agreement in writing of the mortgagee (or chargee or security holder).

[Note: In England, Wales and Scotland a landlord, such as a SRB agreement provider, can only seek possession of a property during the fixed term of an assured tenancy if one or more of a limited number of grounds for possession set out in (in England and Wales) the Housing Act 1988, as amended, or (in Scotland) the Housing (Scotland) Act 1988, as amended, applies and the terms of the tenancy make provision for it to be ended on any of these grounds. Once the fixed term of the assured tenancy has ended, the landlord has the right to seek possession on broader grounds. Where the tenancy is (in England) an assured shorthold tenancy or (in Scotland) a short assured tenancy, the landlord has an additional right to seek possession from the end of the fixed term.

In Northern Ireland, the position is governed by the Private Tenancies (Northern Ireland) Order 2006 and the parties are free to agree the terms of a tenancy including its duration and the grounds on which the landlord may seek possession, including during any fixed term.

In any event it is for the court to decide whether one or more of the grounds for possession actually applies in the particular circumstances of any case.

In Northern Ireland, a tenant must give at least four weeks' notice to quit. Northern Ireland law implies a fixed term of six months in a private tenancy unless the parties agree an alternative fixed term, so a notice to quit expiring before the first six months of the tenancy may not be effective.]

A firm must pay due regard to the interests of its customer and treat him fairly when drafting, amending the terms of, or imposing obligations or exercising rights or discretions under, a home purchase plan, home reversion plan or regulated sale and rent back agreement.2

A firm must ensure that any valuation is carried out by a competent valuer who is independent of the reversion provider or SRB agreement provider.2

4A firm must ensure that any valuation for the purposes of a regulated sale and rent back agreement is carried out by a valuer who owes a duty of care to the customer in valuing the property.

A firm must take reasonable steps to ensure that, when a home reversion plan or regulated sale and rent back agreement2 ends and the customer retains a beneficial interest in the property:

1. (1)

   the property is sold within a reasonable period of time; and

2. (2)

   the best price that might reasonably be obtained is paid.

For the purpose of this section (except this rule), a reversion arranger or reversion administrator'scustomer:

1. (1)

   includes a reversion occupier or potential reversion occupier who enters, or proposes to enter, into a home reversion plan with an unauthorised reversion provider who is the firm'scustomer; and

2. (2)

   excludes an unauthorised reversion provider.

2For the purpose of this section (except this rule), a SRB arranger's or SRB administrator's customer:

1. (1)

   includes a SRB agreement seller or potential SRB agreement seller who enters, or proposes to enter, into a regulated sale and rent back agreement with an unauthorised SRB agreement provider who is the firm'scustomer; and

2. (2)

   excludes an unauthorised SRB agreement provider.

During the course of a distance contract with a consumer4, the making or performance of which constitutes or is part of a regulated mortgage contract, home purchase plan or regulated sale and rent back agreement:5

1. (1)

   the firm must, at the consumer's4 request, provide a paper copy of the contractual terms and conditions of the regulated mortgage contract, home purchase plan,3regulated sale and rent back agreement5 or services being provided by the firm; and

   43
2. (2)

   the firm must comply with the customer's request to change the means of distance communication4 used, unless this is incompatible with the regulated mortgage contract, home purchase plan,3regulated sale and rent back agreement5 or service being provided by the firm.

1A firm must ensure that information provided to a consumer4 before the conclusion of a distance contract about his contractual obligations under that contract conform with the contractual obligations that would be imposed on him under the law applying if the contract were concluded.

1. (1)

   12A firm must not:

   1. (a)

      supply a service to a consumer4 without a prior request on his part, when this activity includes a request for immediate or deferred payment; or

      4
   2. (b)

      enforce any obligations against aconsumer4 in the event of unsolicited supplies of services, the absence of a reply not constituting consent.

      4
2. (2)

   Paragraph (1) applies in relation to mortgage mediation activities, entering into a regulated mortgage contract, home purchase mediation activities or entering into a home purchase plan3 under an organised distance sales or service-provision scheme run by the firm or by an intermediary, who, for the purpose of that supply, makes exclusive use of one or more means of distance communication4 up to and including the time at which the services are supplied.

   23

1This section applies to a firm carrying on an electronic commerce activity from an establishment in the United Kingdom, with or for a person in the United Kingdom or another EEA state, in relation to a home finance transaction.

A firm must make at least the following information easily, directly and permanently accessible to the recipients of the information society services it provides:

1. (1)

   its name;

2. (2)

   the geographic address at which it is established;

3. (3)

   the details of the firm, including its e-mail address, which allow it to be contacted rapidly and communicated with in a direct and effective manner;

4. (4)

   an appropriate statutory status disclosure statement (GEN 4 Annex 1 R), together with a statement which explains that it is on the Financial Services Register and includes its Firm Reference Number;2

   2
5. (5)

   if it is a professional firm, or a person regulated by the equivalent of a designated professional body in another EEA State:

   1. (a)

      the name of the professional body (including any designated professional body) or similar institution with which it is registered;

   2. (b)

      the professional title and the EEA State where the professional title was granted;

   3. (c)

      a reference to the applicable professional rules in the EEA State of establishment and the means to access them; and

6. (6)

   where the firm undertakes an activity that is subject to VAT, its VAT number.

If a firm refers to price, it must do so clearly and unambiguously, indicating whether the price is inclusive of tax and delivery costs.

A firm must ensure that commercial communications which are part of, or constitute, an information society service, comply with the following conditions:

1. (1)

   the commercial communication must be clearly identifiable as such;

2. (2)

   the person on whose behalf the commercial communication is made must be clearly identifiable;

3. (3)

   promotional offers must be clearly identifiable as such, and the conditions that must be met to qualify for them must be easily accessible and presented clearly and unambiguously; and

4. (4)

   promotional competitions or games must be clearly identifiable as such, and the conditions for participation must be easily accessible and presented clearly and unambiguously.

An unsolicited commercial communication sent by e-mail by a firm established in the United Kingdom must be identifiable clearly and unambiguously as an unsolicited commercial communication as soon as it is received by the recipient.

A firm must (except when otherwise agreed by parties who are not consumers):

1. (1)

   give an ECA recipient at least the following information, clearly, comprehensibly and unambiguously, and before the order is placed by the recipient of the service:

   1. (a)

      the different technical steps to follow to conclude the contract;

   2. (b)

      whether or not the concluded contract will be filed by the firm and whether it will be accessible;

   3. (c)

      the technical means for identifying and correcting input errors before the placing of the order; and

   4. (d)

      the languages offered for the conclusion of the contract;

2. (2)

   indicate any relevant codes of conduct to which it subscribes and information on how those codes can be consulted electronically;

3. (3)

   (when an ECA recipient places an order through technological means), acknowledge the receipt of the recipient's order without undue delay and by electronic means (an order and an acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them); and

4. (4)

   make available to an ECA recipient, appropriate, effective and accessible technical means allowing the recipient to identify and correct input errors before the placing of an order.

Contractual terms and conditions provided by a firm to an ECA recipient must be made available in a way that allows the recipient to store and reproduce them.

The requirements relating to the placing and receipt of orders do not apply to contracts concluded exclusively by exchange of e-mail or by equivalent individual communications.

The records required in MCOB must be readily accessible for inspection by the FCA.

1. (1)

   1A firm must not enter into an agreement with a customer under which a charge is, or may become, payable for an optional additional product unless the customer has actively elected to obtain that specific product.

2. (2)

   A firm must not impose a charge on a customer for an optional additional product under an agreement entered into on or after 1 April 2016 unless the customer actively elected to obtain that specific product before becoming bound to pay the charge.

3. (3)

   A firm must not invite or induce a customer to obtain an optional additional product for which a charge will be, or may become, payable if the firm knows or has reasonable cause to suspect that:

   1. (a)

      a contravention of (1) or (2) will take place with respect to the product; or

   2. (b)

      the person supplying the optional additional product will act in a way that would contravene (1) or (2) if that person were a firm.

4. (4)

   An omission by a customer is not to be regarded as an active election for the purposes of this rule.

5. (5)

   It is immaterial for the purposes of (3) whether or not the firm would or might be a party to the agreement for the optional additional product.

6. (6)

   A charge includes a financial consideration of any kind whether payable to the firm or to any other person.

7. (7)

   An optional additional product is a good, service or right of any description (whether or not financial in nature) that a customer may obtain (or not, as the case may be) at his or her election in connection with or alongside entering into a home finance transaction.

8. (8)
   1. (a)

      Where a customer is required to obtain a specific additional product in order to enter into the home finance transaction, the product is not an optional additional product.

   2. (b)

      Where a customer is required to obtain a particular category of additional product (for example, a particular type of insurance) in order to enter into the home finance transaction, and the customer is given a choice as to the seller or supplier from whom to obtain the product or which specific product to obtain, the product is an optional additional product.

9. (9)

   It is immaterial for the purposes of (7) and (8) whether the optional additional product is obtained from the firm or from another person.

10. (10)
    1. (a)

       If, under the terms and conditions of an optional additional product, there is to be an automatic renewal of the agreement on substantially the same terms, it suffices for the purposes of (1) to (3) if the customer actively elected before entering into the initial agreement or a preceding renewal to obtain the product.

    2. (b)

       An automatic renewal of the agreement is not to be regarded as being on substantially the same terms if, following the renewal, a charge will or may become payable for the optional additional product for the first time (in which case, (1) to (3) apply at the time of the renewal).

    3. (c)

       Except as set out in (b), changes in the level of charges for an optional additional product are to be disregarded in determining whether an automatic renewal of an agreement is on substantially the same terms.

11. (11)

    A customer may make an active election for the purposes of this rule through an intermediary in the sales process or through a person acting on behalf of the firm.