MCOB 4.10 1Home purchase plans: sales standards3

3A firm must comply with the rules in MCOB 4.4A as if the references in those rules to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers.

3For the purposes of MCOB 4.4A.2R (1) there is one relevant market for home purchase plans.

3If a firm gives advice to a particular customer to enter into a home purchase plan, or to vary an existing home purchase plan, it must take reasonable steps to ensure that the home purchase plan is, or after the variation will be, suitable for that customer.

3In MCOB 4.10, a reference to advice to enter into a home purchase plan is to be read as including advice to vary an existing home purchase plan.

3For the purposes of MCOB 4.10.5A R:

1. (1)

   a home purchase plan will not be suitable for a customer unless the home purchase plan is appropriate to the needs and circumstances of the customer;

2. (2)

   a firm must base its determination of whether a home purchase plan is appropriate to a customer's needs and circumstances on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;

3. (3)

   no advice must be given to a customer to enter into a home purchase plan if there is no home purchase plan which is suitable from the product range offered by the firm;

4. (4)

   if a home purchase provider is dealing with an existing customer in arrears, with a payment shortfall or otherwise in breach of their home purchase plan and has concluded that there is no suitable replacement home purchase plan, the firm must nonetheless have regard to MCOB 13.3; and

5. (5)

   the reasonable steps in that rule include considering why it is not appropriate for the customer to take out a regulated mortgage contract.

3If a customer has rejected the advice given by a firm and instead requested an execution-only sale of a home purchase plan, the firm may enter into or arrange that execution-only sale provided the requirements in MCOB 4.8A.14 R (as applied in relation to home purchase plans by MCOB 4.10.9B R and modified for home purchase plans by MCOB 4.10.9D R) are satisfied.

MCOB 4.8A applies to a firm as if the references in that section to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers, but MCOB 4.8A.14R (1) and (2) are modified in relation to home purchase plans as set out in MCOB 4.10.9D R.

For home purchase plans, the following items of information replace those set out in MCOB 4.8A.14R (1) and (2):

1. (1)

   the name of the home purchase provider;

2. (2)

   the length of the term required by the customer; and

3. (3)

   the sum required from the home purchase provider.

1A firm must, before advising a customer to enter into, or entering into or arranging3 a home purchase plan as an execution-only sale, 3ensure that the customer is, or has been, provided with an appropriate risks and features statement about that plan.

1A risks and features statement need not be personalised to the customer's circumstances but must:

1. (1)

   include the Key facts logo in a prominent position at the top of the statement;

2. (2)

   state that the FCA requires a firm to provide the statement;

3. (3)

   state that mortgages are available and that the customer should think carefully about the product appropriate to his needs;

4. (4)

   describe the significant features of the plan, including:

   1. (a)

      how the home purchase plan works;

   2. (b)

      the nature of the customer's commitment;

   3. (c)

      when and how a customer's commitment is reviewed;

   4. (d)

      any significant restrictions of the plan; and

   5. (e)

      the charges that a customer may incur under the plan, including the reason for, and amount of, each charge, when they are payable, whether they will be reimbursed and, if so, when;

5. (5)

   describe the risks associated with the plan, including:

   1. (a)

      the risks to the customer if he fails to keep up repayments and the circumstances in which this might occur; and

   2. (b)

      risks to the customer of the home purchase provider failing or disposing of any of its obligations or rights (including its interest in the property) to a third party (taking into account steps that will be taken by the home purchase provider to mitigate such risks); and

6. (6)

   state the importance of obtaining independent legal advice.

1A firm may omit details of the charges that a customer may incur under a home purchase plan from the risks and features statement if they are included in a separate tariff of charges provided to the customer at the same time.

1. (1)

   3A firm must make and retain a record:

   1. (a)

      of the customer information, including that relating to the customer's needs and circumstances that it has obtained for the purposes of MCOB 4.10.5D R;

   2. (b)

      that explains why the firm has concluded that any advice given to a customer complies with MCOB 4.10.5A R and satisfies the suitability requirement in MCOB 4.10.5DR (1); and

   3. (c)

      of any advice which the customer has rejected, including the reasons why it was rejected and details of the home purchase plan which the customer has proceeded with as an execution-only sale.

2. (2)

   The records in (1) must be retained for a minimum of three years from the date on which the advice was given.