MOGI 2.1 Financial promotion (MCOB 3)

Financial promotions include but are not limited to advertisements. They are invitations or inducements to engage in an investment activity (which includes mortgages). They can be solicited or unsolicited and can take various forms, such as mailshots and newspaper or TV advertisements. The financial promotion rules relating to mortgages (which we call 'qualifying credit promotions') are in Chapter 3 of MCOB (MCOB 3).

Financial promotions are prohibited unless they are communicated by an authorised person or an authorised person has approved the content of the promotion or an exemption applies.

The exemptions for qualifying credit promotions are set out in MCOB 3.2.4 R to MCOB 3.2.7 R. For example, promotions are exempt from the content rules where they contain only a limited amount of information. The rules do not apply to advertisements that contain only a company (or trading) name, a logo, a contact point (address or telephone number) and a brief factual statement of your main occupation.

A real time qualifying credit promotion is any promotion made during a personal visit, telephone call or other interactive dialogue. It does not include e-mail.

A non-real time qualifying credit promotion is simply one that is not a real time promotion. This includes letters, faxes, leaflets, newspaper advertisements, TV and radio commercials.

All qualifying credit promotions must be clear, fair and not misleading (see paragraph 2.1.9).

All non-real time qualifying credit promotions must contain the company (or trading) name and an address or contact point such as a telephone number at which the full address is available. You do not need to name us as your regulator, but if you do, and the qualifying credit promotion contains references to matters that we do not regulate, then you must make it clear what we do not regulate.

Rules covering the content of real time qualifying credit promotions are in MCOB 3.8. You must make clear the purpose of your call or visit, and there are detailed requirements covering when you should terminate the call and preventing you from calling at an unsocial hour.

You must be able to show that you have taken reasonable steps to ensure the qualifying credit promotion is clear, fair and not misleading. MCOB 3.6.4 E sets out how you can comply with this rule. Key points include:

1. (1)

   you should not leave out anything, where the exclusion will make the promotion unclear, unfair or misleading;

2. (2)

   you should ensure that when describing a feature of a product you give no less prominence to any disadvantage associated with it;

3. (3)

   you should ensure the accuracy of statements can be substantiated and the facts on which you make any comparison are verified or relevant assumptions prominently disclosed; and

4. (4)

   the design of the promotion should not diminish or obscure the significance of prescribed statements.

Other content requirements apply in specific circumstances depending on the nature of the promotion you publish.

1. (1)

   Comparisons (MCOB 3.6.3 R) must objectively compare one or more verifiable and representative features of the qualifying credit, which can include price.

2. (2)

   Restrictions on using certain expressions (MCOB 3.6.8 R) - for example, 'overdraft' is only allowed to describe an agreement for running-account credit that allows the consumer to overdraw on a current account. You must use the terms 'early repayment charge' and 'higher lending charge' and not use any other expression to describe such charges (MCOB 3.6.9 R).

3. (3)

   Tied products (MCOB 3.6.11 R) - if any qualifying credit is conditional on the consumer buying one or more other product from a specific firm, you must prominently state this in the promotion.

4. (4)

   Risk statements (MCOB 3.6.13 R) - unless the promotion is a transient advertisement (e.g. on TV or radio) you must include certain risk statements for given circumstances.

5. (5)

   APR (MCOB 3.6.17 R) - you must calculate the APR in line with MCOB 10 and must include it in any promotion which includes price information about the mortgage. You must also use it where the promotion refers to the availability of credit for consumers who might consider their access to credit is restricted.

   A specific warning must be used where the promotion is for a product where its price varies according to the specific circumstances of the borrower (MCOB 3.6.25 R).

   If the APR can vary (for example because of the circumstances of the borrower), then you must include an APR that is representative of business expected to arise from the promotion (MCOB 3.6.22 R to MCOB 3.6.24 G). This means that at least 66% of consumers responding to the promotion and entering a qualifying credit agreement as a result must be charged an APR at or below the stated APR.

6. (6)

   Multi-rate advertising (MCOB 3.6.26 R) -where you advertise qualifying credit which, for example, has a special offer rate applying to it for a short time, the promotion must contain equally clear and prominent descriptions of all the rates that will apply and indicate the period for which each rate is applicable.

7. (7)

   Fees for advice or arranging (MCOB 3.6.27 R) -if you publish a promotion for mortgage advice or arranging and you charge a fee for these services, then you must disclose the fee charged. If you do not know this, then you must include a representative fee based on the business you expect to arise from the promotion.

The rules ban unsolicited real time qualifying credit promotions (cold calling), except in limited circumstances (MCOB 3.7.3 R). To be solicited, a qualifying credit promotion must only occur following an express request from the consumer, or be initiated by the consumer (MCOB 3.7.1 R (2)). This will mean that if you get leads from, for example, third-party marketing companies, you will need to ensure the consumer has expressly requested a call from you.

If you have an established existing customer relationship with a consumer you may make unsolicited real time qualifying credit promotions, if the consumer expects to receive such promotions (MCOB 3.7.3 R and MCOB 3.7.4 G).

We have published a series of FAQs that cover this issue in more detail. These are on our website at: www.fsa.gov.uk/mgi/faqs_conduct.html#finproms

Before you communicate or approve a qualifying credit promotion, you must confirm it complies with the rules in MCOB 3. You must ensure this exercise is carried out by someone with appropriate expertise to do so (MCOB 3.9.1 R).

If at any time after you have approved or communicated a qualifying credit promotion, you become aware that it no longer complies with these rules, you must ensure the promotion is withdrawn as soon as practicable (MCOB 3.9.3 R). This will include stopping communication, withdrawing compliance and telling anyone who you know is relying on the communication.