MCOB 5.7 Business loans

Where the regulated mortgage contract is for a business purpose, a firm may choose to provide a business illustration (in compliance with MCOB 5.7.2 R) instead of complying with MCOB 5.6.

A business illustration provided to a customer must:

1. (1)

   use the headings and prescribed text in MCOB 5 Annex 1 (except as provided in MCOB 5.7) but need not follow the format;

2. (2)

   include the content required by MCOB 5.6.3 R to MCOB 5.6.130 G (except MCOB 5.6.5 R, MCOB 5.6.101 R, MCOB 5.6.109 R to MCOB 5.6.112 G, MCOB 5.6.120 R and MCOB 5.6.121 R);1

3. (3)

   use the key facts logo followed by the text 'about this [term used by the firm to describe the borrowing, for example 'mortgage']';

4. (4)

   use font sizes and typefaces consistently throughout the business illustration which are sufficiently legible so that the business illustration can be easily read by a typical customer;

5. (5)

   ensure that the information is clearly laid out (for example, through the use of bullet points or similar devices to separate information);

6. (6)

   describe any early repayment charge as an 'early repayment charge' and not use any other expression to describe such charges;

7. (7)

   describe any higher lending charge as a 'higher lending charge' and not use any other expression to describe such charges; and

8. (8)

   include the risk warning described in MCOB 5.6.124 R, or an equally clear and effective variation of this reflecting the nature of the regulated mortgage contract.

Any business illustration provided by a firm must be limited to facilities provided under a regulated mortgage contract.

MCOB 5.6.31 R(2), MCOB 5.6.52 R(1) and MCOB 5.6.52 R(4) prescribe text that should be used to remind a customer with an interest-only mortgage that there is a need to separately arrange for the repayment of capital. The options for repayment of capital may be different where the regulated mortgage contract is for a business purpose, and a firm must vary the prescribed wording in the business illustration to reflect this. One approach may be for the firm to revise the wording to reflect how the customer has said he will repay the capital.

1. (1)

   When providing a business illustration in accordance with MCOB 5.7.2 R a firm should describe facilities provided under the regulated mortgage contract that are not a loan within section 12 (Additional features) of the business illustration.

2. (2)

   In complying with (1), a firm should follow the requirements in MCOB 5.6.92 RMCOB 5.6.108 G where these are relevant. Where the facility is of a type not considered in MCOB 5.6.92 RMCOB 5.6.108 G the firm should provide in section 12:

   1. (a)

      a brief description of the facility involved;

   2. (b)

      the term of the facility if different from the term described elsewhere in the business illustration; and

   3. (c)

      a summary of any charges, including any early repayment charges, which apply to the operation of the facility.

3. (3)

   Full information on any facility described in section 12 must be provided in supplementary materials that accompany the business illustration.