Related provisions for MCOB 10.3.12
1 - 20 of 135 items.
An illustration provided to a customer must:(1) contain the material set out in the relevant annex to this chapter in the order and using the numbered section headings, sub-headings and text prescribed, except where this section provides otherwise;88(2) follow the format of the template in 8the relevant annex to this chapter8, with:(a) prominent use of the Key facts5 logo followed by the text 'about this lifetime mortgage' or 'about this home reversion plan'8;55(b) each section
A firm must include in the illustration all prescribed section headings, except that:8(1) in Section 8 of the lifetime mortgageillustration8 (What you owe and when):(a) Section 8 (A) (details of mortgage payments) is only required where the customer is required to make payments to the mortgage lender in respect of the capital or all or part of the interest charged on the lifetime mortgage;77(b) Section 8(B) (projection of roll-up of interest) is only required where all or part
As a minimum the illustration must be personalised to reflect the following:(1) the specific equity release transaction8 in which the customer is interested;8(2) the amount of the loan or equity8 required by the customer, or for drawdown mortgages and instalment reversion plans,8 the amount the customer wishes to draw down or to receive8 on a monthly (or such frequency that amounts are available) basis. Where the amount the customer can draw down is variable, the firm must agree
In relation to the price or value of the property8, in order for the firm to comply with the principle that an illustration should be clear, fair and not misleading8, an estimated valuation, where the estimated valuation is not that provided by the customer, must be a reasonable assessment based on all the facts available at the time. For example, an overstated valuation could enable a more attractive lifetime mortgage7 to be illustrated on the basis of a lower ratio of the loan
(1) In estimating the term of a lifetime mortgage or an open-ended instalment reversion plan,8 a firm must:8(a) use the following mortality table: PMA92(C=2010) and PFA92(C=2010) for males and females respectively, derivable from the Continuous Mortality Investigation Report 17, published by the Institute of Actuaries and the Faculty of Actuaries in 1999; and2(b) for the purposes of the illustration, where the table does not result in a life expectancy expressed in whole years,
The amount to be specified in the illustration and 8referred to in MCOB 9.4.6 R(2) is:(1) the amount that the customer has asked to borrow, release8 or draw down; or(2) where the lifetime mortgage7 is a revolving credit agreement such as a secured overdraft or mortgage credit card:67(a) 6(if it provides for an initial drawdown and linked borrowing facilities that would allow the customer to increase the amount of the loan without any further approval from the mortgage lender)
Where the loan under the lifetime mortgage7 is divided into more than one part (for example where part of the loan is a fixed interest rate and part of the loan is a discounted variable interest rate) and the firm displays this in a tabular format in the illustration:7(1) the following text must be used to introduce the table "As this lifetime mortgage is made up of more than one part, these parts are summarised below:";(2) each part must be numbered for ease of reference in the
Examples of text that would satisfy MCOB 9.4.31 R(1), depending on the nature of the7lifetime mortgage,7 are:(1) "This lifetime mortgage will provide a lump sum of £[x].";(2) "The amount you are borrowing will automatically be used to purchase a [name of linked investment product] from [name of provider]. The amount is £[x]."; and(3) "You will receive a monthly [or such other frequency as is applicable] payment from the start of your lifetime mortgage. This will be £ [state a
(1) Except where (3) applies, where the customer is required to make payments to the mortgage lender on thelifetime mortgage,7 and the customer's payments can vary with changes in interest rates at any time during the life of thelifetime mortgage,7 Section 9: "Will the interest rate change?" must also contain the following text:"The [frequency of payments from MCOB 9.4.37 R] payments shown in this illustration could be considerably different if interest rates change. For example,
Where the customer is not required to make payments to the mortgage lender on the lifetime mortgage7 and therefore all or part of the interest is rolled up, Section 10: "How the value of your home could change" must contain the following text:"When you look at how the amount you owe goes up, remember also that property prices can go up or down, and this can affect the amount of money left over for you or your estate after the mortgage is repaid to [name of mortgage lender].".
An example of a fee that would be included in Section 11 would be an administrative charge to redeem thelifetime mortgage.7 An example of a fee that would not be included would be a fee payable by the customer to insure their property elsewhere (however this would need to be stated in the separate "Insurance" section as required by MCOB 9.4.72 R). Where fees are payable only on early repayment of thelifetime mortgage.7 they should not be stated here (however these fees would need
If the lifetime mortgage7 does not require the customer to take out insurance as a tied product, the sub-heading "Insurance you must take out through [insert name of mortgage lender and where relevant the name of the mortgage intermediary] "must be retained and a statement must be provided under this heading that the customer is not obliged to take out any insurance through the mortgage lender or, where relevant, the mortgage intermediary.7
Under the heading "What happens if you do not want this mortgage any more?", the illustration must include the following information on the lifetime mortgage:77(1) under the sub-heading "Early repayment charges":(a) an explanation of whether early repayment charges are payable;(b) an explanation of when early repayment charges are payable;(c) an explanation of any other fees that are payable if the lifetime mortgage7 is repaid early, and the current level of these fees;7(d) a
Under the sub-heading "Credit card", the illustration must:(1) state whether a credit card is offered with thelifetime mortgage;7 and7(2) if a credit card is offered and it is a mortgage credit card:(a) unless (b) applies, include the following text:"This card will not give you a number of the statutory rights associated with traditional credit cards. Your lifetime mortgage offer will tell you more about the differences." or(b) where the mortgage lender provides the customer with
(1) Where additional features are included in accordance with MCOB 9.4.91 R and these are credit facilities that do not meet the definition of a regulated mortgage contract or a regulated credit agreement9, the relevant parts of Section 14 of the illustration must include the following text:"This additional feature is not regulated by the FCA."1(2) Where additional features are included in accordance with MCOB 9.4.91 R and these are credit facilities that meet the definition of
If the customer's liability under a lifetime mortgage7 is in a currency other than sterling, MCOB 9.4 applies to the illustration for that lifetime mortgage7 with the following modifications:77(1) all cash amounts must be given in the relevant currency except where otherwise required by (2)(a) and (3);(2) the following information must be stated under Section 5 "Description of this mortgage"(a) the amount in sterling on which the illustration is based from MCOB 9.4.13 R based
This section, unless otherwise stated in or in relation to a rule: (1) applies to a firm with respect to consumer credit lending;(2) applies to a firm with respect to credit broking where the firm has or takes on responsibility for providing the disclosures and explanations to customers required by this section;(3) does not apply to an agreement under which the lender provides the customer with credit which exceeds £60,260;(4) does not apply to an agreement secured on land; and(5)
For the agreements referred to in CONC 4.2.1R (3), (4) and (5), a firm within CONC 4.2.1R (1) or CONC 4.2.1R (2) should consider whether it is necessary or appropriate to provide explanations of the matters in CONC 4.2.5R (2); in particular, a firm should consider highlighting the principal consequences to the customer including the consequences of missing payments or under-paying, including, where applicable, the risk of repossession of the customer's property.[Note: section
(1) The disclosure regulations made under section 55 of the CCA which require information to be disclosed before a regulated credit agreement is made remain in force.(2) Failure to comply with the disclosure regulations has the effect that agreements are enforceable against a borrower or hirer (as defined in the CCA) only with an order of court and enforcement for that purpose includes a retaking of goods or land to which the agreement relates.(3) Other relevant disclosure requirements
(1) Before making a regulated credit agreement the firm must:(a) provide the customer with an adequate explanation of the matters referred to in (2) in order to place the customer in a position to assess whether the agreement is adapted to the customer's needs and financial situation;(b) advise the customer:(i) to consider the information which is required to be disclosed under section 55 of the CCA; and(ii) where the information is disclosed in person, that the customer is able
Where the regulated credit agreement is high-cost short-term credit, the lender or a credit broker must explain under CONC 4.2.5R (1)(a) that entering into that agreement would be unsuitable to support sustained borrowing over long periods and would be expensive as a means of longer term borrowing. [Note: paragraph 3.13 (box) of ILG]
Before a lender concludes that CONC 4.2.5R (1) to CONC 4.2.5R (4) do not apply to it in relation to a regulated credit agreement by virtue of CONC 4.2.5R (5), the lender must take reasonable steps to satisfy itself that an explanation of that agreement complying with CONC 4.2.5 R has been provided to the customer by the credit broker. [Note: paragraph 3.11 (box) of ILG]
The following information must be provided by the lender or a credit broker as part of, and in addition to that provided under, the adequate explanation required by CONC 4.2.5 R, where applicable, in the specified cases: (1) for credit token agreements:(a) different rates of interest and different charges apply to different elements of the credit provided (for example, a higher cost of withdrawing cash);(b) the implications of only making minimum repayments; (c) interest rates
For a regulated credit agreement marketed and concluded by electronic means to comply with CONC 4.2.5 R the customer should pass through screens containing the required information and explanations, giving the customer the opportunity to see and read the explanations provided. Merely providing a link to where such information can be found is unlikely to satisfy the requirements in CONC 4.2.5 R, where the agreement can be concluded without accessing the link.[Note: paragraph 3.15
Firms which carry on consumer credit lending or credit broking should comply with all rules which apply to that regulated activity in CONC and other parts of the Handbooks. For example, CONC 7 applies to matters concerning arrears, default and recovery (including repossession) and applies generally to agreements to which this chapter applies. This chapter sets out specific requirements and guidance that apply in relation to agreements secured on land. Regulated mortgage contracts
The financial promotion rules in CONC 3 apply to firms'financial promotions concerning credit agreements secured on land, apart from the extent to which a financial promotion or communication concerns qualifying credit. CONC 3.3.1 R requires financial promotions to be clear fair and not misleading; firms should take particular care with respect to explaining the nature of the credit to be provided and the costs of borrowing. [Note: paragraph 3.2 of SCLG]
In good time before a credit agreement is made and, where section 58 applies, before an unexecuted agreement is sent to the customer for signature a firm must:(1) disclose key contract terms and conditions of the prospective credit agreement;[Note: paragraph 2.1 of SCLG](2) disclose any features of the prospective credit agreement which carry a particular risk to the customer;[Note: paragraph 3.4 of SCLG](3) inform the customer of the consequences of missing payments or of making
Where a firm has reasonable grounds to suspect that the customer does not understand material aspects of the obligations they will take on and the resulting risks, under a regulated credit agreement, the firm:(1) must not enter into a regulated credit agreement; and (2) must provide further explanation of any such obligations or risks. [Note: paragraph 3.5 of SCLG]
Before a customer enters into a regulated credit agreement, the firm must:(1) encourage the customer to read all contractual documentation carefully; [Note: paragraph 4.2 of SCLG](2) take reasonable steps to ensure the customer has understood the nature of the obligations the customer will take on and the resulting risks;[Note: paragraph 3.5 of SCLG](3) encourage the customer to obtain independent advice; and[Note: paragraphs 2.1 and 4.2 of SCLG](4) permit the customer an adequate
Before a regulated credit agreement secured on land is entered into: (1) the firm should consider the adequate explanations it should give to the customer under CONC 4.2; and[Note: paragraph 3.1 (box) of ILG](2) the firm is required under CONC 5.2.2 R (1) to assess the potential for commitments under the agreement to adversely impact the customer's financial situation.[Note: paragraphs 1.14 and 4.1 of ILG]
In accordance with PRIN 9 (customer: relationships of trust):(1) a firm must take reasonable steps to ensure the suitability of its advice, which would include acting in the best interests of a customer where the firm makes a recommendation; (2) if it appears to the firm that entering into a regulated credit agreement secured on land is not in the best interests of the customer, that fact should be made clear to the customer; and (3) the firm should encourage the customer to consider
Where rates and charges under a credit agreement are variable, a firm must:(1) before entering into the agreement, explain to the customer the consequences of such variations on the amount of periodic instalments payable and on the total amount payable;(2) only increase rates or charges to recover genuine increases in costs of the firm which have an effect on the credit provided under the agreement; and (3) explain to the customer before changing any rate or charge under the agreement.[Note:
(1) A firm must set the minimum required repayment under a regulated credit agreement for a credit card or a store card at an amount equal to at least that amount which repays the interest, fees and charges that have been applied to the customer's account, plus one percentage of the amount outstanding. [Note: paragraph 6.4 of ILG](2) Where (1) applies and a firm applies interest to a period of more than one month, for the purpose of calculating the amount of the interest part
A firm under a regulated credit agreement for a credit card or a store card must provide a customer with the option to pay any amount they choose (equal to or more than the minimum required repayment but less than the full outstanding balance) on a regular basis, when making automated repayments. [Note: paragraph 6.5 of ILG]
(1) A firm under a regulated credit agreement for a credit card or store card must notify the customer at least 30 days before a credit limit increase under the agreement comes into effect. [Note: paragraph 6.17 of ILG](2) Paragraph (1) does not apply where a customer requests a temporary credit limit increase to deal with an emergency situation and, where CONC 6.2.1 R applies, the firm carries out the required creditworthiness assessment in relation to any such increase.
Where a firm proposes to exercise a power under a regulated credit agreement for a credit card or store card to increase the interest rate, the firm must: (1) permit the customer sixty days, from the date of the firm's notice of the proposed increase during which period the customer may give notice to the firm requiring it to close the account;(2) permit the customer to pay off the outstanding balance at the rate of interest before the proposed increase and over a reasonable
Examples of valid reasons for increasing the rate of interest in CONC 6.7.14 R include:(1) recovering the genuine increased costs of funding the provision of credit under the agreement; and (2) a change in the risk presented by the customer which justifies the change in the interest rate, which would not generally include missing a single repayment or failing to repay in full on one or two occasions [Note: paragraph 6.20 (box) of ILG]
(1) In CONC 6.7.18 R to CONC 6.7.23 R “refinance” means to extend, or purport to extend, the period over which one or more repayment is to be made by a customer whether by:(a) agreeing with the customer to replace, vary or supplement an existing regulated credit agreement;(b) exercising a contractual power contained in an existing regulated credit agreement; or(c) other means, for example, granting an indulgence or waiver to the customer. (2) “Exercise forbearance” means to refinance
A firm must not refinance a customer's existing credit with the firm (other than by exercising forbearance), unless: (1) the firm does so at the customer's request or with the customer's consent; and (2) the firm reasonably believes that it is not against the customer's best interests to do so. [Note: paragraph 6.24 of ILG]
(1) For the purposes of this section, references to the period for which credit is provided:(a) in the case of a credit agreement under which the period for which credit is to be provided is ascertainable at the date of the making of the credit agreement, are references to the period beginning with the relevant date and ending with the end of the period for which credit is to be provided; (b) in the case of a credit agreement under which the period for which credit is to be provided
(1) Any calculation under this section shall be made on the following assumptions(a) the assumption that the borrower will not be entitled to any income tax relief relating to the transaction other than relief under section 19 of the Income and Corporation Taxes Act 1970 and Schedule 4 to the Finance Act 1976 (which afford relief in respect of premiums under certain policies of insurance) without any deduction under section 21 of the said Act of 1970;(b) the assumption that no
For the purposes of the Regulated Activities Order, the total charge for the credit which may be provided under an actual or prospective credit agreement shall be the total of the amounts determined as at the date of the making of the credit agreement of such of the charges specified in CONC App 1.1.5 R as apply in relation to the credit agreement but excluding the amount of the charges specified in CONC App 1.1.6 R.
Except as provided in CONC App 1.1.6 R, the amounts of the following charges are included in the total charge for credit in relation to a credit agreement:(a) the total of the interest on the credit which may be provided under the credit agreement;(b) other charges at any time payable under the transaction by or on behalf of the borrower or a relative of his whether to the lender or any other person; and (c) a premium under a contract of insurance, payable under the transaction
(1) The amounts of the following items are not included in the total charge for credit in relation to a credit agreement:(a) any charge payable under the transaction to the lender upon failure by the borrower or a relative of his to do or to refrain from doing anything which he is required to do or to refrain from doing, as the case may be;(b) any charge(i) which is payable by the lender to any person upon failure by the borrower or a relative of his to do or to refrain from doing
The rate of the total charge for credit in the case of an actual or prospective credit agreement shall be the annual percentage rate of charge determined in accordance with the following provisions of CONC App 1.1.8 R to CONC App 1.1.10 R and (where it has more than one decimal place) rounded to one decimal place in accordance with CONC App 1.1.8 R.
(1) Subject to (4) below, the annual percentage rate of charge is the rate for i which satisfies the equation set out in (2) below, expressed as a percentage.(2) The equation referred to in (1) above is(3) In (2) above, references to instalments are references to any payment made by, or on behalf of, the borrower or a relative of his which comprises(a) a repayment of all or part of the credit under the credit agreement;(b) a payment of all or part of the total charge for credit;
(1) The provisions of CONC App 1.1.11 R to CONC App 1.1.18 R shall have effect as the case may require for the purpose of the calculation of the total charge for credit under CONC App 1.1.4 R to CONC App 1.1.6 R above and of the rate of such charge under CONC App 1.1.7 R to CONC App 1.1.10 R above in relation to any actual or prospective credit agreement in respect of matters necessary for the calculation which cannot be ascertained by the lender at the date of the making of
Where the amount of the credit to be provided under the credit agreement cannot be ascertained at the date of the making of the credit agreement,(a) in the case of a credit agreement for running-account credit under which there is a credit limit, that amount shall be taken to be such credit limit; and(b) in any other case, that amount shall be taken to be £100.
Subject to CONC App 1.1.15 R, where the rate or amount of any item included in the total charge for credit or the amount of any repayment of credit under a transaction falls to be ascertained thereunder by reference to the level of any index or other factor in accordance with any formula specified therein, the rate or amount, as the case may be, shall be taken to be the rate or amount so ascertained, the formula being applied as if the level of such index or other factor subsisting
- (1)
This rule applies to any land-related agreement which provides for the possibility of any variation of the rate of interest if it is to be assumed, by virtue of CONC App 1.1.3R (1)(e), that the variation will take place but the amount of the variation cannot be ascertained at the date of the making of the credit agreement.
- (2)
In this rule
“initial standard variable rate”
means
(a)
the standard variable rate of interest which would be applied by the lender to the credit agreement on the date of the making of the credit agreement if the credit agreement provided for interest to be paid at the lender's standard variable rate with effect from that date, or
(b)
if there is no such rate, the standard variable rate of interest applied by the lender on the date of the making of the credit agreement in question to other land-related agreements or, where there is more than one such rate, the highest such rate,
taking no account (for the avoidance of doubt) of any discount or other reduction to which the borrower would or might be entitled; and
“varied rate”
means any rate of interest charged when a variation of the rate of interest is to be assumed to take place by virtue of CONC App 1.1.3R (1)(e).
- (3)
Where a land-related agreement provides a formula for calculating a varied rate by reference to a standard variable rate of interest applied by the lender, or any other fluctuating rate of interest, but does not enable the varied rate to be ascertained at the date of the making of the credit agreement because it is not known on that date what the standard variable rate will be or (as the case may be) at what level the fluctuating rate will be fixed when the varied rate falls to be calculated, it shall be assumed that that rate or level will be the same as the initial standard variable rate.
- (4)
Where a land-related agreement provides for the possibility of any variation in the rate of interest (other than a variation referred to in (3) above) which it is to be assumed, by virtue of CONC App 1.1.3R (1)(e) will take place but does not enable the amount of that variation to be ascertained at the date of the making of the credit agreement, it shall be assumed that the varied rate will be the same as the initial standard variable rate.
Where(a) the period for which the credit or any part thereof is to be or may be provided cannot be ascertained at the date of the making of the credit agreement; and (b) the rate or amount of any item included in the total charge for credit will change at a time provided in the transaction within one year beginning with the relevant date, the rate or amount shall be taken to be the highest rate or amount at any time obtaining under the transaction in that year.
In the case of any transaction it shall be assumed(a) that a charge payable at a time which cannot be ascertained at the date of the making of the credit agreement shall be payable on the relevant date or, where it may reasonably be expected that a borrower will not make payment on that date, on the earliest date at which it may reasonably be expected that he will make payment; or(b) where more than one payment of a charge of the same description falls to be made at times which
15There are six activities that fall within credit broking. These are:(1) effecting an introduction of an individual who wishes to enter into a credit agreement to another person, with a view to that person entering as lender into a credit agreement by way of business;(2) effecting an introduction of an individual who wishes to enter into a consumer hire agreement to another person, with a view to that person entering as owner into a consumer hire agreement by way of business
(1) 15This activity is aimed at what are sometimes referred to as peer-to-peer lending platforms. A person ("A") will be operating an electronic system in relation to lending if he operates an electronic system which enables him to facilitate persons ("B" and "C") becoming the lender and borrower under an article 36H agreement. (2) To be caught, all of the following conditions must be met:(a) the electronic system operated by A must be capable of determining which agreements should
15This activity comprises:(1) negotiating with the lender or owner, on behalf of the borrower or hirer, terms for the discharge of a debt;(2) taking over, in return for payments by the borrower or hirer, that person's obligation to discharge a debt; or(3) any similar activity concerned with the liquidation of a debt;when carried on in relation to debts due under a credit agreement or consumer hire agreement.
(1) 15Taking steps to procure the payment of a debt due under a credit agreement or a consumer hire agreement is a regulated activity.(2) Taking steps to procure the payment of a debt due under an article 36H agreement (see PERG 2.7.7HG (3)) which has been entered into with the facilitation of an operator of an electronic system in relation to lending is also a regulated activity.(3) The activity is not a regulated activity in so far as the activity is operating an electronic
(1) 15Taking steps to perform duties or to exercise or to enforce rights under a credit agreement or a consumer hire agreement on behalf of the lender or owner is a regulated activity.(2) Taking steps to perform duties or to exercise or to enforce rights under an article 36H agreement (see PERG 2.7.7HG (3)) which has been entered into with the facilitation of an operator of an electronic system in relation to lending is also a regulated activity.(3) In so far as the activity is
15A credit agreement is an exempt agreement17 in the following cases:(1) if it is a regulated mortgage contract or a home purchase plan;(2) if: (a) the lender provides the borrower with credit exceeding £25,000; and(b) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower;(3) if: (a) the lender provides the borrower with credit of £25,000 or less; and(b) the agreement is entered
15If a credit agreement includes a declaration which:(1) is made by the borrower;(2) provides that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower; and(3) complies with the rules in CONC App 1.4;the credit agreement is to be presumed to have been entered into by the borrower wholly or predominantly for business purposes. This presumption does not apply, however, if the
15A credit agreement is an exempt agreement17 if, at the time it is entered into:(1) any sums due under it are secured by a legal or equitable mortgage on land; and(2) less than 40% of the land is used, or is intended to be used, as or in connection with a dwelling:(a) by the borrower or a related person of the borrower; or(b) in the case of credit provided to trustees, by an individual who is a beneficiary of the trust or a related person of a beneficiary(3) For these purposes,
15A credit agreement is an exempt agreement17 in the following cases:(1) if the credit agreement is a relevant credit agreement relating to the purchase of land and the lender is a local authority;(2) if the credit agreement is a relevant credit agreement relating to the purchase of land specified in CONC App 1.3 and the lender is a person or within a class of persons specified in CONC App 1.3;(3) if the credit agreement is secured by a legal or equitable mortgage on land, that
15A credit agreement is also an exempt agreement in the following cases:(1) if (subject to PERG 2.7.19H G):(a) the agreement is a borrower-lender-supplier agreement for fixed-sum credit;(b) the number of payments to be made by the borrower is not more than four;(c) those payments are required to be made within a period of 12 months or less (beginning on the date of the agreement); and(d) the credit is:(i) secured on land; or(ii) provided without interest or other charges;(2) if
15A credit agreement is also an exempt agreement17 in the following cases:(1) if it is a borrower-lender agreement, the lender is a credit union and the rate of the total charge for credit (see CONC App 1) does not exceed 42.6 per cent;(2) if (subject to (5) and (6)): (a) it is a borrower-lender agreement; (b) it is offered to a particular class of individual and not offered to the public generally;(c) it provides that the only charge included in the total charge for credit (see
15A credit agreement is an exempt agreement17 if:(1) the borrower is an individual;(2) the agreement is either secured on land or for credit which exceeds £60,260;(3) the agreement includes a declaration, made by the borrower which provides that the borrower agrees to forgo the protection and remedies that would be available to the borrower if the agreement were a regulated credit agreement, which complies with CONC App 1.4;(4) a statement has been made in relation to the income
15As in the case of a credit agreement (see PERG 2.7.19D G), if a consumer hire agreement includes a declaration which:(1) is made by the hirer;(2) provides that the agreement is entered into by the hirer wholly or predominantly for business purposes; and(3) complies with CONC App 1.4;the consumer hire agreement is to be presumed to have been entered into by the hirer for business purposes. This presumption does not apply, however, if the owner or any person who has acted on behalf
(1) A firm must disclose to the customer the fee, if any, payable by a customer to the firm for its services. [Note: section 160A(4) of CCA] (2) Any fee to be paid by the customer to the firm must be agreed between the customer and the firm, and that agreement must be recorded in writing or other durable medium before a regulated credit agreement is entered into.[Note: section 160A(4) of CCA] (3) A firm must disclose to the lender the fee, if any, for its activity payable by the
(1) The APR must be calculated on the basis of the following assumptions:(a) the assumption that the customer will not be entitled to any income tax relief relating to the transaction other than relief under sections 266-7 of the Income and Corporation Taxes Act 1988 and Schedule 14-15 to the same Act without any deduction under section 274 of the Income and Corporation Taxes Act 1988;(b) the assumption that no assistance is given under the Home Purchase Assistance and Housing
(1) MCOB 10.3.7 R to MCOB 10.3.13 R apply for the purpose of the calculation of the total charge for credit and of the rate of that charge in respect of matters necessary for the calculation which cannot be ascertained by the mortgage lender or mortgage administrator at the date of the making of the agreement.(2) In a case where MCOB 10.3.7 R and one or more of MCOB 10.3.8 R to MCOB 10.3.13 R are applicable, MCOB 10.3.7 R must be applied first.
(1) Where the amount of the credit to be provided under the agreement cannot be ascertained at the date of the making of the agreement:(a) in the case of an agreement for running-account credit under which there is a credit limit, that amount must be taken to be that credit limit; and(b) in any other case, that amount shall be taken to be £100.(2) Where a mortgage lender makes a further advance to the customer in addition to the amount originally borrowed under the regulated mortgage
Subject to MCOB 10.3.10 R, where the rate or amount of any item included in the total charge for credit, or the amount of any repayment of credit under a transaction, is to be ascertained by reference to the level of any index or other factor in accordance with a specified formula, the rate or amount must be taken to be the rate or amount so ascertained. The formula must be applied as if the level of the index or other factor subsisting at the date of the making of the agreement
(1) The assumptions in MCOB 10.3.10 R(3) and (4) apply to any secured lending contracts which provide for the possibility of any variation of the rate of interest if it is to be assumed, under MCOB 10.3.3 R(1)(e), that the variation will take place but the amount of the variation cannot be ascertained at the date of the making of the agreement.(2) In this paragraph:(a) 'initial standard variable rate' means:(i) the standard variable rate of interest which would be applied by the
Where:(1) the period for which the credit, or any of it, is to be or may be provided cannot be ascertained at the date of the making of the agreement; and(2) the rate or amount of any item included in the total charge for credit will change at a time provided in the transaction within one year beginning with the relevant date;the rate or amount must be taken to be the highest rate or amount under the transaction at any time in that year.
In the case of any transaction, it must be assumed:(1) that a charge payable at a time which cannot be ascertained at the date of the making of the agreement is to be payable on the relevant date or, where it may reasonably be expected that a customer will not make payment on that date, on the earliest date at which it may reasonably be expected that he will make payment; or(2) where more than one payment of a charge of the same description is to be made at times which cannot
(1) For the purposes of articles 60H(c) and 60Q(b) of the Regulated Activities Order, a declaration made by the borrower or hirer which provides that the borrower or hirer agrees to forgo the protection and remedies that would be available to the borrower or hirer if the agreement were a regulated credit agreement or a regulated consumer hire agreement must comply with CONC App 1.4.2 R and CONC App 1.4.6 R. (2) For the purposes of articles 60H(d) and 60Q(c) of the Regulated Activities
A declaration for the purposes of articles 60H(c) and 60Q(b) of the Regulated Activities Order shall (1) be set out in the credit agreement or consumer hire agreement no less prominently than other information in the agreement and be readily distinguishable from the background medium; and(2) be signed by the borrower or hirer, unless the agreement is so signed.
A person who is(1) the lender or owner;(2) an employee or agent of the lender or owner or a person who otherwise acts on behalf of the lender or owner in relation to the credit agreement or consumer hire agreement; or(3) an associate of the lender or owner, may only make a statement of high net worth if the lender or owner is a person who has Part 4A permission to accept deposits.
A declaration for the purposes of articles 60C or 60O of the Regulated Activities Order shall(1) comply with CONC App 1.4.8 R;(2) be set out in the credit agreement or consumer hire agreement no less prominently than other information in the agreement and be readily distinguishable from the background medium; and(3) be signed by the borrower or hirer or where the borrower or hirer is a partnership or unincorporated body of persons be signed by, or on behalf of, the borrower or
The declaration for the purposes of articles 60H(c) and 60Q(b) of the Regulated Activities Order must have the following form and content- “Declaration by high net worth borrower or hirer(articles 60H and 60Q of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)I confirm that I have received a copy of the statement of high net worth made in relation to me for the purposes of article 60H(d) or article 60Q(c) of the Financial Services and Markets Act
A statement of high net worth for the purposes of articles 60H(d) and 60Q(c) of the Regulated Activities Order must have the following form and content:“Statement of High Net Worth(articles 60H(1) and 60Q of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)(articles 60H and 60Q of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)I/We* (insert full name) .............................................................. of (insert
A declaration for the purposes of articles 60C or 60O of the Regulated Activities Order must have the following form and content“Declaration for exemption relating to businesses(articles 60C and 60O of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)I am/We are* entering this agreement wholly or predominantly for the purposes of a business carried on by me/us or intended to be carried on by me/us.I/We* understand that I/We* will not have the benefit
This section applies:(1) to a financial promotion in relation to consumer credit lending;(2) to a financial promotion in relation to credit broking in relation to regulated credit agreements;(3) to a financial promotion in relation to activities specified in article 36A(1)(a) or (c) of the Regulated Activities Order in relation to what would be regulated credit agreements but for a relevant provision, but only where the firm also carries on such activities in relation to regulated
A financial promotion must not be communicated where it indicates a firm is willing to provide credit under a regulated restricted-use credit agreement relating to goods or services to be supplied by any person, when at the time the financial promotion is communicated, the firm or any supplier under such an agreement does not hold itself out as prepared to sell the goodsor provide the services (as the case may be) for cash. [Note: section 45 of CCA]
(1) Where a financial promotion includes a rate of interest or an amount relating to the cost of credit whether expressed as a sum of money or a proportion of a specified amount, the financial promotion must also: (a) include a representative example in accordance with CONC 3.5.5 R, and (b) specify a postal address at which the person making the financial promotion may be contacted.[Note: regulation 4(1) of CCAR 2010](2) Paragraph (1)(a) does not apply where the financial promotion:
(1) The representative example in CONC 3.5.3R (1) must comprise the following items of information: (a) the rate of interest, and whether it is fixed or variable or both, expressed as a fixed or variable percentage applied on an annual basis to the amount of credit drawn down;(b) the nature and amount of any other charge included in the total charge for credit;(c) the total amount of credit;(d) the representative APR;(e) in the case of credit in the form of a deferred payment
(1) A financial promotion must include the representative APR if it: (a) indicates in any way, including by means of the name given to the business or the product or of an address used by a business for the purposes of electronic communication, that:(i) credit is available to persons who might otherwise consider their access to credit restricted; or (ii) any of the terms on which credit is available is more favourable (either for a limited period or generally) than corresponding
(1) A financial promotion must not include: (a) the word “overdraft” or any similar expression as describing any agreement for running-account credit, except where an agreement enables a customer to overdraw on a current account;(b) the expression “interest free” or any similar expression indicating that a customer is liable to pay no greater amount in respect of a transaction financed by credit than he would be liable to pay as a cash purchaser for the like transaction, except
(1) Where a financial promotion is about running-account credit and the credit limit applicable is not yet known on the date the financial promotion is made, but it is known that it will be less than £1,200, the credit limit must be assumed to be an amount equal to that maximum limit. [Note: paragraph 1 of schedule to CCAR 2010](2) The assumption in (1) applies in place of the assumption in CONC App 1.2.5 R for the purpose of calculating the total charge for credit.Total charge
(1) A firm should not unfairly discriminate against a customer who it understands, or reasonably suspects, has a mental capacity limitation, in particular, by inappropriately denying the customer access to credit. [Note: paragraph 4.8 of MCG](2) It would not be inappropriate not to grant credit nor significantly increase the amount of credit under an agreement nor set a credit limit for running account credit where the firm reasonably believes the agreement or decision would be
Firms should present clear, jargon-free information in explaining credit agreements in a way that makes it as easy as possible for the customer to understand. Firms should consider ways to present information in alternative, more 'user-friendly' formats where it appears appropriate to do so, subject to compliance with the relevant statutory requirements. [Note: paragraph 4.20 of MCG]
Where a firm knows, or reasonably suspects, that a customer has or may have one of the conditions in CONC 2.10.6 G this could justifiably act as a trigger for the firm to consider the potential specific steps in giving effect to the firm's practices and procedures for assessing: (1) whether or not the customer appears able to understand, remember, and weigh up the information and explanations provided and, when having done so, make an informed borrowing decision;(2) whether the
Where a firm understands, or reasonably suspects, a customer has or may have a mental capacity limitation it should apply a high level of scrutiny to the customer's application for credit, in order to mitigate the risk of the customer entering into unsustainable borrowing (see CONC 5.2 and CONC 5.3). [Note: paragraphs 4.32 and 4.33 of MCG]
Where a firm understands, or reasonably suspects, a customer has or may have a mental capacity limitation the firm should take particular care that the customer is not provided with credit which the firm knows, or reasonably believes, to be unsuitable to the customer's needs, even where the credit would be affordable.[Note: paragraph 4.43 of MCG]
This section applies:(1) to a financial promotion in relation to consumer credit lending in relation to regulated credit agreements secured on land; and(2) to a financial promotion in relation to credit broking in relation to regulated credit agreements secured on land; and in both cases other than financial promotions to the extent that they relate to qualifying credit.
In this section, for a financial promotion relating to credit to be provided under a credit agreement “relevant date” means:(1) in a case where a date is specified in or determinable under the agreement at the date of its making as that on which the customer is entitled to require provision of anything the subject of the agreement, the earliest such date; and(2) in any other case, the date of the making of the agreement.
A financial promotion must not be communicated where it indicates a firm is willing to provide credit under a regulated restricted-use credit agreement secured on land relating to goods or services to be supplied by any person, when at the time the financial promotion is communicated, the firm or any supplier under such an agreement does not hold itself out as prepared to sell the goods or provide the services (as the case may be) for cash.[Note: section 45 of CCA]
(1) Where a financial promotion concerns a facility for which security is or may be required, the promotion must:(a) state that security is or may be required; and(b) specify the nature of the security.[Note: regulation 7(1) of CCAR 2004](2) Where, in the case of a financial promotion, the security comprises or may comprise a mortgage or charge on the customer's home:(a) except where (c) applies, the financial promotion must contain a warning in the form:“YOUR HOME MAY BE REPOSSESSED
(1) A financial promotion must specify the typical APR if the promotion:(a) specifies any other rate of charge;(b) includes any of the items of information listed in CONC 3.6.10R (5) to (7);(c) indicates in any way, including by means of the name given to a business or of an address used by a business for the purposes of electronic communication, that:(i) credit is available to persons who might otherwise consider their access to credit restricted; or(ii) any of the terms on which
Whether or not a reference to speed or ease in CONC 3.6.6R (1)(e) constitutes an incentive to apply for credit or enter into an agreement under which credit is provided would depend upon the circumstances, including whether it is likely to persuade or influence a customer to take those steps or is merely a factual statement about the product or service.
(1) A financial promotion must not include:(a) the word “overdraft” or any similar expression as describing any agreement for running-account credit, except where the agreement enables a customer to overdraw on a current account; (b) the expression “interest free” or any similar expression indicating that a customer is liable to pay no greater amount in respect of a transaction financed by credit than he would be liable to pay as a cash purchaser for the like transaction, except
(1) In the case of a financial promotion about running-account credit, the following assumptions have effect for the purpose of calculating the total charge for credit and any APR, notwithstanding the terms of the transaction advertised and in place of any assumptions in CONC App 1.1.11 R to CONC App 1.1.18 R that might otherwise apply:(a) the amount of the credit to be provided must be taken to be £1,500 or, in a case where credit is to be provided subject to a credit limit
(1) The amount of credit which may be provided under a credit agreement or an indication of one or both of the maximum amount and the minimum amount of credit which may be provided. [Note: paragraph 1 of schedule 2 to CCAR 2004]Deposit of money in an account(2) A statement of any requirement to place on deposit any sum of money in any account with any person. [Note: paragraph 2 of schedule 2 to CCAR 2004]Cash price(3) In the case of a financial promotion about credit to be provided
This table belongs to MCOB 8.1.1 R
(1) Category of firm |
(2) Applicable section |
| 4 | |
| 4 | whole chapter except MCOB 8.6. MCOB 8.7 does not apply in relation to a lifetime mortgage4 |
| 4 | whole chapter except MCOB 8.5. MCOB 8.7 does not apply in relation to a lifetime mortgage4 |
(1) Initial disclosure requirements apply4 only in relation to varying the terms of an equity release transaction4 entered into by the customer in any of the following ways:44(a) adding or removing a party;(b) taking out a further advance; or(c) switching all or part of the lifetime mortgage3 from one interest rate to another.13(2) Otherwise, this chapter applies in relation to any form of variation of an equity release transaction.444
(1) Before making a regulated credit agreement the firm must undertake an assessment of the creditworthiness of the customer.[Note: section 55B(1) of CCA](2) A firm carrying out the assessment required in (1) must consider: (a) the potential for the commitments under the regulated credit agreement to adversely impact the customer's financial situation, taking into account the information of which the firm is aware at the time the regulated credit agreement is to be made; and [Note:
(1) Before entering into a regulated credit agreement which is excluded from CONC 5.2.1 R (see (4), (5) and (6)), a firm must carry out an assessment of the potential for the commitments under the agreement to adversely impact the customer's financial situation, taking into account the information of which the firm is aware at the time the agreement is to be made.[Note: paragraphs 1.14 and 4.1 of ILG] (2) Paragraph (1) does not apply to an agreement to which CONC 4.7.2R (1) applies
The extent and scope of the creditworthiness assessment or the assessment required by CONC 5.2.2R (1), in a given case, should be dependent upon and proportionate to factors which may include one or more of the following:(1) the type of credit; (2) the amount of the credit;(3) the cost of the credit;(4) the financial position of the customer at the time of seeking the credit;(5) the customer's credit history, including any indications that the customer is experiencing or has experienced
(1) To consider all of the factors set out in CONC 5.2.3 G in all cases is likely to be disproportionate. [Note: paragraph 4.11 of ILG](2) A firm should consider what is appropriate in any particular circumstances dependent on, for example, the type and amount of the credit being sought and the potential risks to the customer. The risk of credit not being sustainable directly relates to the amount of credit granted and the total charge for credit relative to the customer's financial
MCOB applies to regulated mortgage contracts entered into on or after 31 October 2004. A contract that was entered into before 31 October 2004, and that is subsequently varied on or after that date, will not be a regulated mortgage contract but may be a regulated credit agreement to which the CCA and CONC apply. If, however, a new contract is entered into on or after 31 October 2004, replacing the previous contract, this may be a regulated mortgage contract.4PERG 4.4.13G2 contains
Principle 2 requires a firm to conduct its business with due skill, care and diligence. The purpose of MCOB 1.6.3 R is to reinforce this. The FCA would expect firms to take appropriate steps to determine whether any mortgage it proposes to enter into is subject to FCA regulation and, if so, whether it is a regulated mortgage contract or a regulated credit agreement4.
If, notwithstanding the steps taken by a firm to comply with MCOB 1.6.3 R, it transpires that a mortgage which the firm has treated as unregulated or as a regulated credit agreement4 is in fact a regulated mortgage contract, the firm must as soon as practicable after the correct status of the mortgage has been established:(1) contact the customer and provide him with the following information in a durable medium:(a) a statement that the mortgage contract is a regulated mortgage
(1) MCOB 1.6.4 R(2) means, for example, that if a firm discovered immediately after completion that a loan was a regulated mortgage contract, the firm would be required to comply with MCOB 7.4 (Disclosure at the start of the contract).(2) Although MCOB 1.6.4 R recognises that firms may become aware that a mortgage is a regulated mortgage contract at a late stage, the FCA expects this to be an extremely rare occurrence. It could arise, for example, if a firm has acted on the understanding,
(1) In making the creditworthiness assessment or the assessment required by CONC 5.2.2R (1), a firm should take into account more than assessing the customer's ability to repay the credit. [Note: paragraph 4.2 of ILG](2) The creditworthiness assessment and the assessment required by CONC 5.2.2R (1) should include the firm taking reasonable steps to assess the customer's ability to meet repayments under a regulated credit agreement in a sustainable manner without the customer incurring
A firm must not base its creditworthiness assessment, or its assessment required under CONC 5.2.2R (1), primarily or solely on the value of any security provided by the customer, but this rule does not apply in relation to a regulated credit agreement under which the firm takes an article in pawn and the customer's liability is limited to the value of the article plus interest on the credit and there are no additional charges.
A firm must not advise or encourage a customer to enter into a regulated credit agreement for an amount of credit higher than the customer initially requested if the creditworthiness assessment or the assessment required by CONC 5.2.2R (1) indicates that repayment of the higher amount would not be sustainable or the firm ought reasonably to suspect that that is the case.[Note: paragraph 4.28 of ILG]
A firm must not complete some or all of those parts of an application for credit under a regulated credit agreement intended to be completed by the customer, without the consent of the customer, unless the customer is permitted to check the application before signing the agreement. [Note: paragraph 4.30 of ILG]
A firm must not accept an application for credit under a regulated credit agreement where the firm knows or ought reasonably to suspect that the customer has not been truthful in completing the application in relation to information supplied by the customer relevant to the creditworthiness assessment or the assessment required by CONC 5.2.2R (1).[Note: paragraph 4.31 of ILG]
But even if advice is given in the United Kingdom, the general prohibition will not be contravened if the giving of advice does not amount to the carrying on, in the United Kingdom, of the business of advising on investments or advising on a home finance transaction1. Also, the general prohibition will not be contravened if the exclusion for overseas persons in article 72 of the Regulated Activities Order (Overseas persons) applies. That exclusion applies in relation to the giving
If a person is carrying on the business of advising on investments or advising on a home finance transaction1in the United Kingdom, he will not require authorisation if:(1) he is able to rely on an exclusion; in addition to the exclusions already mentioned (in articles 54 and 72 of the Regulated Activities Order), other exclusions that may be relevant are in Chapter XVII of Part II of the Regulated Activities Order; or(2) he is an exempt person (see PERG 2.11 (What to do now?1));
Many people may be involved in the production of a periodical publication, news service or broadcast. But if the regulated activity of advising on investments or advising on a home finance transaction1 is being carried on so that authorisation is required, the FCA's view is that the person carrying on the activity (and who will require authorisation) is the person whose business it is to have the editorial control over the content. In the case of a periodical publication, this
(1) In this section(a) a reference to a rate of interest is a reference to the interest rate expressed as a fixed or variable percentage applied on an annual basis to the amount of credit drawn down;(b) a reference to an open-end regulated credit agreement is to a regulated credit agreement of no fixed duration and includes credits which must be repaid in full within or after a period but, once repaid, become available to be drawn down again.
(1) The total charge for credit which may be provided under an actual or prospective regulated credit agreement shall be the total cost of credit to the borrower determined in accordance with the requirements in (2) to (5) below.(2) Subject to (3), the following costs shall be included in the total cost of credit to the borrower(a) the costs of maintaining an account recording both payment transactions and drawdowns;(b) the costs of using a means of payment for both payment transactions
For the purposes of calculating the total charge for credit and the annual percentage rate of charge(a) it shall be assumed that the regulated credit agreement is to remain valid for the period agreed and that the lender and the borrower will fulfil their obligations under the terms and by the dates specified in that agreement;(b) in the case of a regulated credit agreement allowing variations in(i) the rate of interest, or(ii) where applicable, charges contained in the annual
(1) MCOB 5.1 to MCOB 5.5 (with the modifications stated in MCOB 9.3.2 R to MCOB 9.3.12 R) apply to a firm where the home finance transaction is an equity release transaction, except that those provisions that by their nature are only relevant to regulated mortgage contracts do not apply to home reversion plans (see MCOB 9.1.2A G).33(2) The table in MCOB 9.3.2 R shows how the relevant rules and guidance in MCOB 5 must be modified by replacing the cross-references with the relevant
3The provisions in this sourcebook that apply to home reversion plans should be read in a purposive way. This means that firms should substitute equivalent home reversion terminology for lifetime mortgage terminology, where appropriate. Examples of terms and expressions that must be replaced are 'loan' or 'amount borrowed', which should be replaced with 'amount released' or 'amount to be released', as appropriate, and 'mortgage lender' and 'mortgage intermediary' which should
An offer document may not always exactly match the illustration provided before application even when the equity release3 requirements have not changed. For example, where a fixed rate has a defined end date, the total amount payable may be different because the number of payments at the fixed rate has reduced, or the estimated amount of interest to be charged has changed, assuming a later date at which the lifetime mortgage3will start.33
In meeting a request for written information specific to the customer's requirements on a particular equity release transaction (see MCOB 5.5.1 R (2)(c))3, the firm must not delay the provision of the illustration by requesting information other than:3(1) the information necessary to personalise the illustration, if the firm does not already know it;3(2) where the firm is uncertain whether the transaction will be an equity release transaction,3 such information as is necessary