MCOB 5.4 22Information on regulated mortgage contracts: general3

It is the responsibility of a mortgage intermediary to ensure compliance with MCOB 5.4.3 R. However, where a firm can show that it was reasonable for it to rely on information provided to it by another person, other than the mortgage lender, that an illustration was accurate, it 4 may be able to rely on MCOB 2.5.2 R, if this turns out not to be the case.

The purpose of MCOB 5.4.8 R is not to require a firm to ascertain whether a customer is eligible for a particular regulated mortgage contract before providing an illustration. Instead, the purpose is to ensure that the firm takes into account the information it has obtained from the customer before providing an illustration to the customer.

A firm may satisfy MCOB 5.4.10 R by drawing the customer's attention orally to the importance of reading and understanding the illustration, for example in a face-to-face meeting, or by referring to its importance in a covering letter or electronic communication or other written information that accompanies the illustration.

3When providing information on regulated mortgage contracts, firms should bear in mind that the information must be given in accordance with MCOB 2.5A.1 R (The customer’s best interests).

3MCOB 53 places no restrictions on the provision of information that is not specific to the amount the customer wants to borrow, for example, marketing literature including generic mortgage repayment tables or graphs illustrating the benefits of making a regular overpayment on a flexible mortgage. Such literature may, however, constitute a financial promotion2 and be subject to the provisions of MCOB 3A 4(Financial promotions and communications with customers).4

1. (1)

   3In order to demonstrate compliance with MCOB 5.4.18AR (1), a firm may wish to consider, for example, doing one or more of the following: give the messages to the customer in a durable medium; build the requirements into the firm's training of staff, as evidenced by its training and compliance manuals; insert appropriate prompts into paper-based or automated sales systems; have procedures in place to monitor compliance by its staff with that rule. What is required in each case will depend on all the circumstances.

2. (2)

   The reference in the template illustration at MCOB 5 Annex 1 R to the possibility of obtaining other illustrations is not sufficient to comply with the obligations in MCOB 5.4.18AR (1)(b) and MCOB 5.4.18B R. A firm may, however, satisfy those obligations in a number of ways; for example, by drawing the customer's attention to the right to request an illustration orally in a face-to-face meeting, or by referring to it in a letter or electronic communication or other written information.

MCOB 5.4.19 R does not require a firm to keep records of illustrations that are issued to a customer where the customer does not apply to enter into that particular regulated mortgage contract.

The record maintained in accordance with MCOB 5.4.19 R should contain or refer to matters such as:

1. (1)

   the date on which the illustration was provided to the customer;

2. (2)

   the date of the application made by the customer; and

3. (3)

   details of the medium through which the illustration was provided.

The rules on the content of an illustration at MCOB 5.6 (Content of illustrations) mean that if the regulated mortgage contract requires the customer to take out a tied product, the illustration must include an accurate quotation or a reasonable estimate of the payments the customer would need to make for the tied product (see MCOB 5.6.52 R (2) where the tied product is a repayment strategy and MCOB 5.6.74 R where the tied product is insurance).3 If it is not possible to include this cost information in the illustration, MCOB 5.4.23 R requires that the customer be provided with an accurate quotation of the payments associated with the tied product as soon as possible. If the quotation is provided after the customer has applied for the regulated mortgage contract the customer has the right to a refund of fees if he withdraws his application.