MCOB 4.6 Cancellation of distance mortgage mediation contracts
A retail customer has no right to cancel a regulated mortgage contract concluded with a firm but may have a right to cancel a distance contract concluded with a mortgage intermediaryfor the provision of his services. Whether a mortgage intermediary or a home purchase intermediary concludes a distance mortgage mediation contractwith a retail customer will depend on the circumstances. For example, an intermediary may not, in advising on or arranging a regulated mortgage contract, act contractually on behalf of, or for, the customer. In such circumstances, no distance mediation contract will arise for the firm's services, and therefore no right to cancel. If there is a contract between the customer and the mortgage intermediary, however, and therefore there is a right to cancel, the firm is required by MCOB 4.5.2 R(1) to provide the information in MCOB 4 Annex 3(5).
The information provided in accordance with MCOB 4 Annex 3(5) should be sufficiently clear, prominent and informative to enable the retail customer to understand the right to cancel.
Where the notice of the right to cancel forms part of another document, or is one of a number of documents sent to the retail customer at the same time, a firm should ensure that the presence of the notice of the right to cancel is drawn to the retail customer's attention.
Cancellation period
- (1)
A retail customer has a right to cancel a distance mortgage mediation contractin accordance with this section.
- (2)
The right to cancel must be exercised within 14 days beginning on the later of:
- (a)
the day of the conclusion of the contract; or
- (b)
the day on which the retail customer receives the contractual terms and conditions and other information required by MCOB 4.4 and MCOB 4.5.
- (a)
Exercising the right to cancel
A retail customer who has a right to cancel a distance mortgage mediation contractmay, without giving any reason, cancel the contract by serving notice on the firm, before the expiry of the cancellation period in MCOB 4.6.4 R either:
- (1)
by serving on, or otherwise sending by post, notice to the firm's last known address, addressed to the firm, its appointed representative or on any agent of the firm with authority to accept notice on the firm's behalf; or
- (2)
in accordance with any other practical instructions for exercising that right provided to the retail customer in accordance with MCOB 4 Annex 3(5).
Where the notice of cancellation is in a durable medium and is served in accordance with MCOB 4.6.5 R, it must be treated as being served on the firm on the date it is despatched by the retail customer.
In the event of any dispute, unless there is clear written evidence to the contrary, the firm should treat the date cited by the retail customer as being the date when notice was given, posted or otherwise sent.
Effects of cancellation
By exercising a right to cancel under MCOB 4.6.4 R the retail customer withdraws from the contract and the entire contract is terminated.
Regulation 11 (Automatic cancellation of an attached distance contract) of the Distance Marketing Regulations, has the effect that when notice of cancellation is given in relation to a contract, that notice also operates to cancel any attached contract, which is also a distance financial services contract. An example of such an attached contract might be a distance non-investment insurance contract.
When a retail customer exercises a right to cancel under MCOB 4.6.4 R:
- (1)
the firm must:
- (a)
pay to the retail customer without delay, and no later than 30 days after the date on which the firm received notice of cancellation from him, any sums which he has paid to or for the benefit of the firm in connection with the contract (including sums paid by the retail customer to agents of the firm) except for the amount referred to in (b);
- (b)
subject to (c), the firm is permitted to require the retail customer to pay for the services it has actually provided in connection with the contract; the amount payable, however, must be in accordance with the sums which the retail customer agreed to pay and must not:
- (i)
exceed an amount which is in proportion to the extent of the service already provided to the retail customer by the firm; and
- (ii)
be such that it could be construed as a penalty;
- (i)
- (c)
sub-paragraph (b) applies only if:
- (i)
where performance of the contract has commenced before expiry of the cancellation period, this was requested by the retail customer; and
- (ii)
the firm can demonstrate that the retail customer was provided with details of the amount which he may be required to pay if exercising his right to cancel in accordance with MCOB 4 Annex 3(5).
- (i)
- (a)
- (2)
The firm is entitled to receive without delay, and no later than 30 days after the date on which the retail customer posted or otherwise sent notice of cancellation to the firm any property that became the retail customer's under the contract and any sums payable to the firm under (1)(b).
Record keeping
Where notice of cancellation has been served on a firm (or its appointed representative or agent), the firm must make and retain a record (which includes a copy of any receipt of notice issued to the retail customer and the retail customer's original notice instructions) for three years from the date when the firm first became aware that notice of cancellation had been served.