Related provisions for MCOB 9.4.104

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MCOB 5.6.14GRP
(1) MCOB 5.6.13 R applies where, for example, the illustration covers a regulated mortgage contract that is:(a) divided so that a certain amount of the loan is payable on a fixed interest rate, and a certain amount on a discounted interest rate; or(b) a combination of a repayment mortgage and an interest-only mortgage and the loan is subdivided into different types of interest rate and/or different rates of interest.(2) MCOB 5.6.13 R does not apply where an illustration covers
MCOB 5.6.18RRP
(1) Under the section heading 'What you have told us', the illustration must state the information that has been obtained from the customer under MCOB 5.6.6 R (apart from MCOB 5.6.6 R(1) which is provided for in Section 4 of the illustration), and can include brief details of any other information that has been obtained from the customer and used to produce the illustration.(2) If the amount on which the illustration is based includes the amount that the customer wants to borrow
MCOB 5.6.20RRP
Where the same illustration covers a regulated mortgage contract that has different parts of the loan over a different term (that is, the final repayment date of the loan parts are different), either:(1) Section 3 of the illustration must state the amount repayable over each term; or(2) Section 3 of the illustration must state the longest term that applies and Section 4 of the illustration must state the amount repayable over each term.
MCOB 5.6.21RRP
For the purpose of illustrating to the customer the repayment method in Section 3 or Section 4 of the illustration, or the cost of the regulated mortgage contract in Section 5 of the illustration, if the illustration covers a regulated mortgage contract that is a combination of more than one interest-only part on the same product terms but with different repayment dates, the illustration must either treat it as one part by assuming the longest term, or alternatively treat it as
MCOB 5.6.28RRP
Where the loan under the regulated mortgage contract 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:(1) the following text must be used to introduce the table 'As this 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
MCOB 5.6.34RRP
The following text must be included after the text required by MCOB 5.6.31 R or MCOB 5.6.32 R with the relevant cost measures shown in the right-hand column of Section 5 in accordance with the layout shown in MCOB 5 Annex 1:(1) 'The total amount you must pay back, including the amount borrowed is £[insert total amount payable]';(2) 'This means you pay back £[insert the total amount payable] divided by the amount on which the illustration is based from MCOB 5.6.6 R(2) plus all
MCOB 5.6.37RRP
At the end of Section 5 of the illustration the following text must be included:(1) unless the interest rate is fixed throughout the term of the regulated mortgage contract:'The figures in this section will vary following interest rate changes and if you do not keep the mortgage for [insert term from MCOB 5.6.6 R(4)].'; and(2) (a) where the regulated mortgage contract is a repayment mortgage:'Only use the figures in this section to compare the cost with another repayment mortgage.';
MCOB 5.6.42RRP
Section 6 of the illustration must contain the following information: (1) the loan amount on which the illustration is based. This figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the [fees] [and] [insurance premiums] that are shown in [Section 8] [and] [Section 9] as being added to your mortgage.'(2) the assumed
MCOB 5.6.60RRP
The amount by which the customer's payments would increase in accordance with MCOB 5.6.59 R(1)(g) and (h) must be calculated as follows:(1) the firm must use the total amount borrowed, or assume that all payments due on the regulated mortgage contract have actually been paid, all additional fees and payments due have been paid, and no underpayments or overpayments have been made;(2) where all or part of the regulated mortgage contract is a repayment mortgage, the calculation must
MCOB 5.6.70RRP
(1) If a higher lending charge is payable by the customer, the following text must be used to describe such a charge for the purposes of MCOB 5.6.69 R:'A higher lending charge is payable because you are borrowing [insert the ratio of the mortgage amount (from MCOB 5.6.6 R(2)) to the property's price or value (from MCOB 5.6.6 R(3))] of the property's [estimated] [price/value].'(2) If the customer has asked for any fees to be added to the loan, this must be stated alongside each
MCOB 5.6.78GRP
Under the sub-heading 'Insurance you must take out as a condition of this mortgage but that you do not have to take out through [insert name of mortgage lender or where relevant the name of the mortgage intermediary, or both]' the illustration should not include any insurance policy that may be taken out by a mortgage lender itself to protect its own interests rather than the customer's interests, for example, because of the ratio of the loan amount to the property value.1
MCOB 5.6.79GRP
If the cost of any insurance that the mortgage lender might take out to protect its own interests, because of the ratio of the loan amount to the property value, is passed on to the customer, it will be shown elsewhere in the illustration, for example, as a higher lending charge or in the interest rate charged.
MCOB 5.6.84RRP
Under the heading 'What happens if you do not want this mortgage any more?', the illustration must include the following information on the regulated mortgage contract:(1) under the sub-heading 'Early repayment charges':(a) an explanation that the customer cannot repay the regulated mortgage contract early, if this is the case;(b) an explanation of whether early repayment charges are payable;(c) an explanation of when early repayment charges are payable;(d) an explanation of any
MCOB 5.6.97RRP
Under the sub-heading 'Borrow back', the illustration must include details of circumstances in which the customer can borrow back any monies overpaid and a brief statement of any conditions that apply.
MCOB 5.6.99RRP
Under the sub-heading 'Additional borrowing available without further approval', the illustration must provide details of circumstances in which there are any linked borrowing facilities that would allow the customer to increase the amount of the loan on which the illustration is based without any further approval from the mortgage lender (for example, if there are additional drawdown facilities).
MCOB 5.6.103RRP
Where any of the additional features under MCOB 5.6.99 R to MCOB 5.6.102 R inclusive apply, then the following must also be stated if the amount of additional borrowing that would be available to the customer is stated in the illustration:(1) the maximum additional amount available;(2) if the interest rate payable on any additional borrowing is different to the interest rate in Section 4 and Section 6 of the illustration, the interest rate and the APR charged on the additional
MCOB 5.6.124RRP
4(1) 4The following words must be prominently displayed in the illustration, after the contact details: 'Your home may be repossessed if you do not keep up repayments on your mortgage'.(2) If the loan may be secured on property which is not the customer's home the statement in (1) may be amended but only to the extent necessary in order to reflect that fact.4
MCOB 5.6.132RRP
If the interest rate charged on the regulated mortgage contract is deferred, MCOB 5.6 applies with the following additions:(1) A section headed: 'Effect of deferring interest on the amount you owe' must be included in the illustration after Section 6.(2) This section must be numbered 6a so that the numbering follows on consecutively from the preceding section unless MCOB 5.6.55 R applies in which case it should be numbered 6b.(3) Under the section heading the following text must
MCOB 5.6.136RRP
Section 6 of the illustration must contain the following information:(1) the loan amount on which the illustration is based. Where fees are being added to the loan then this figure should include all fees, charges and insurance premiums that have been added to the loan in accordance with MCOB 5.6.18 R(2) and MCOB 5.6.18 R(3), and the following text must follow the loan amount:'and include[s] the fees [and insurance premiums] that are shown in Section 8 [and Section 9] as being
MCOB 5.6.141RRP
The amount by which the total amount payable would increase in accordance with MCOB 5.6.140 R(1)(e) must be calculated as follows:(1) unless the total amount borrowed is used, it must be assumed that all payments due on the regulated mortgage contract have actually been paid, all additional fees and payments due have been paid, and no under or overpayments have been made;(2) unless the total amount borrowed is used, the calculation must be based on the amount of the loan outstanding
MCOB 9.4.48RRP
Unless all of the interest rates described in MCOB 9.4.47 R(4) apply for the life of the loan part to which they apply, then an additional sub section titled "What you will owe in future" must be included to indicate the future stepped payments. This section must:(1) state when a change in payment will occur;(2) state the reason for the change in payment; and(3) confirm that the payment illustrated assumes that interest rates will not change.
MCOB 9.4.83RRP
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
MCOB 9.4.93RRP
The relevant sub-headings are as follows:(1) "Overpayments"(2) "Underpayments"(3) "Payment holidays"(4) "Borrow back"(5) "Additional borrowing available without further approval"(6) "Additional secured borrowing"(7) "Credit card"(8) "Unsecured borrowing"(9) "Linked current account" and(10) "Linked savings account".
MCOB 9.4.99RRP
Under the sub-heading "Additional borrowing available without further approval", the illustration must provide details of circumstances in which additional secured lending is offered with the lifetime mortgage7 that would allow the customer, subject to certain conditions, to increase the amount of the loan on which the illustration is based.7
MCOB 9.4.100RRP
Under the sub-heading "Additional secured borrowing", the illustration must provide details of circumstances in which additional secured lending is offered with the lifetime mortgage7 that would allow the customer, subject to certain conditions, to increase the amount of the loan on which the illustration is based.7
MCOB 9.4.101RRP
Under the sub-heading "Unsecured borrowing", the illustration must provide details of circumstances in which unsecured lending is offered with the lifetime mortgage7 that would allow the customer to increase the amount of the loan on which the illustration is based.7
MCOB 9.4.103RRP
Where any of the additional features under MCOB 9.4.99 R to MCOB 9.4.102 R inclusive apply, then the following must also be stated if the amount of additional borrowing that would be available to the customer is stated in the illustration:(1) the maximum additional amount available;(2) if the interest rate payable on any additional borrowing is different to the interest rate in Section 5 and Section 8 of the illustration, the interest rate and the APR charged on the additional
MCOB 9.4.105GRP
The purpose of MCOB 9.4.104 R is to show the total amount of any additional borrowing facilities that would be available to the customer and the cost of utilising these facilities. It must combine the amount available under any linked borrowing facilities including additional secured lending, credit cards and unsecured lending.
MCOB 9.4.132CGRP
If only part of the loan under the lifetime mortgage is of the type described in MCOB 9.4.132AR (for example, if part of the loan is on an interest roll-up basis from the outset, and part is convertible from interest-paying to interest roll-up):(1) the modifications set out in MCOB 9.4.132DR apply only to that part of the loan that is of the type described in MCOB 9.4.132AR; and(2) the projection of roll-up of interest on the part of the loan that is on an interest roll-up basis
MCOB 9.7.2RRP
A firm that enters into a lifetime mortgage1 with a customer where interest payments are required (whether or not they will be collected by deduction from the income from an annuity or other linked investment product) must provide the customer with the following information before the customer makes the first payment under the contract:1(1) the amount of the first payment required;(2) the amount of the subsequent payments;(3) the method by which the payments will be collected
MCOB 9.7.4RRP
A firm that enters into a lifetime mortgage1 which is a drawdown mortgage, with fixed payments to the customer, must provide the customer with the following information before the first payment is drawn down by the customer:1(1) the amount of the first payment to be made;(2) the amount of subsequent payments, if different; (3) the method by which the payment will be made (for example, by transfer to the customer's bank account) and the date of issue of the first and subsequent
MCOB 9.7.6RRP
Where the lifetime mortgage1 is a drawdown mortgage and the customer can choose the amount and frequency of the payments they receive, or the amount and frequency of payments can vary for other reasons (for example in line with interest rates) the firm must provide the customer with the following information before the first payment is drawn down by the customer:1(1) (a) where the customer can choose the amount and frequency of the payments they receive, details of any limitations
MCOB 9.7.8RRP
Where thelifetime mortgage1 provides for a lump sum payment to be made to the customer, and all or part of the interest will be rolled up during the life of the mortgage, the firm must provide the customer with the following information before the customer makes the first payment under the contract, or if no payments are required from the customer, within seven days of completion of the mortgage:1(1) if no payments are required from the customer, confirmation that no payments
MCOB 9.8.1RRP
The statement required by MCOB 7.5.1 R must contain the following information:(1) except in the case of mortgage credit cards, information on the type oflifetime mortgage,3 (for example, fixed rate or variable rate) including a clear statement of how the firm expects the capital, or capital and interest (whichever is applicable) to be repaid (for example, from the proceeds of the sale of the property);3(2) details of the following transactions and information on the lifetime
MCOB 5.7.7GRP
(1) In accordance with MCOB 5.7.6 R(1), where the regulated mortgage contract includes a loan, the facilities described in section 12 of the business illustration or high net worth illustration3 should include the existence of, and a simple explanation of, any all monies charge, any contingent liabilities such as guarantees and so on.(2) Where the regulated mortgage contract includes more than one loan facility (such as a secured loan and a separate secured overdraft facility)
CONC 7.17.5RRP
(1) The duty of the firm to give the borrower notices under CONC 7.17.4 R will cease when either of the conditions mentioned in (2) is satisfied but, if either of those conditions is satisfied before the notice required by CONC 7.17.4R (1) is given, the duty will not cease until that notice is given.(2) The conditions referred to in (1) are:(a) that the borrower ceases to be in arrears;(b) that a judgment is given in relation to the agreement under which a sum is required to be
CREDS 10.1.3GRP

Module

Relevance to Credit Unions

The Principles for Businesses (PRIN)

The Principles for Businesses (PRIN) set out 3high-level requirements 3imposed by the FCA3. They provide a general statement of regulatory requirements. The Principles apply to all12credit unions. In applying the Principles to credit unions, the FCA3 will be mindful of proportionality. In practice, the implications are likely to vary according to the size and complexity 3of the credit union.

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Senior Management Arrangements, Systems and Controls (SYSC)

SYSC 1,3SYSC 4 to 10 and SYSC 213 apply to all credit unions in respect of the carrying on of their regulated activities and unregulated activities in a prudential context. SYSC 4.5 (Management responsibilities maps for relevant authorised persons), SYSC 4.7 (Senior management responsibilities for relevant authorised persons: allocation of responsibilities), SYSC 4.9 (Handover procedures and material), SYSC 5.2 (Certification regime) and SYSC 18 apply3 to all credit unions in respect of both their regulated activities and their unregulated activities3.

3Code of Conduct (COCON)

This contains rules and guidance that are directly applicable to a credit union’sSMF managers, certification employees and (from 2017) other conduct rules staff. There is also guidance for credit unions on giving their staff training about COCON.

Threshold Conditions (COND)

In order to become authorised under the Act all firms must meet the threshold conditions. The threshold conditions must be met on a continuing basis by credit unions. Failure to meet one of the conditions is sufficient grounds for the exercise by the FCA3 of its powers.

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3

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The Fit and Proper test for Approved Persons (FIT)

The purpose of FIT is to set out and describe the criteria that a firm should3 consider when assessing the fitness and propriety of a person (1)3 in respect of whom an application is being made for approval to undertake a controlled function under the approved persons regime, (2)3 who has already been approved, (3) who is a certification employee or (4) whom a firm is considering appointing to be a certification employee3.

It also sets out and describes criteria that the FCA will consider when assessing the fitness and propriety of a candidate for a controlled function position and that it may consider when assessing the continuing fitness and propriety of approved persons.3

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General Provisions (GEN)

GEN contains rules and guidance on general matters, including interpreting the Handbook, statutory status disclosure, the FCA's3 logo and insurance against financial penalties.

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Fees manual (FEES)

This manual sets out the fees applying to credit unions.

3Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU)

MIPRU applies to any credit union carrying out insurance distribution activity5 or home finance mediation activity, or using these services. In particular, it sets out requirements for allocation of responsibility for the credit union’sinsurance distribution activity5 (MIPRU 2), for the use of home finance intermediaries (MIPRU 5) and for professional indemnity insurance (MIPRU 3).

Conduct of Business sourcebook (COBS)

A credit union which acts as a CTF provider or provides a cash-deposit ISA will need to be aware of the relevant requirements in COBS. COBS 4.6 (Past, simulated past and future performance), COBS 4.7.1 R (Direct offer financial promotions), COBS 4.10 (Systems and controls and approving and communicating financial promotions), COBS 13 (Preparing product information) and COBS 14 (Providing product information to clients) apply with respect to accepting deposits as set out in those provisions, COBS 4.1 and BCOBS. A credit union that communicates with clients, including in a financial promotion, in relation to the promotion of deferred shares and credit union subordinated debt will need to be aware of the requirements of COBS 4.2 (Fair, clear and not misleading communications) and COBS 4.5 (Communicating with retail clients).4

3Insurance: Conduct of Business sourcebook (ICOBS)

ICOBS applies to any credit union carrying on non-investment insurance distribution5 activities, such as arranging or advising on general insurance contracts to be taken out by members. But ICOBS does not apply to a credit union taking out an insurance policy5 for itself, such as a policy5 against default by members on their loans where the credit union is the beneficiary of the policy5, since in this circumstance the credit union would not be acting as an insurance intermediary, but would itself be the customer. Credit unions are reminded that they are subject to the requirements of the appropriate legislation, including the Credit Unions Act 1979, relating to activities a credit union may carry on.

3Mortgages and Home Finance: Conduct of Business sourcebook (MCOB)

MCOB applies to any credit union that engages in any home finance activity. MCOB rules cover advising and selling standards, responsible lending (including affordability assessment), charges, and the fair treatment of customers in payment difficulties.

Banking: Conduct of Business sourcebook (BCOBS)

BCOBS sets out rules and guidance for credit unions on how they should conduct their business with their customers. In particular there are rules and guidance relating to communications with banking customers3and financial promotions (BCOBS 2), distance communications (BCOBS 3), information to be communicated to banking customers3(BCOBS 4), post sale requirements (BCOBS 5), and cancellation (BCOBS 6). 3The rules in BCOBS 3.1 that relate to distance contracts may apply 3to a credit union. This is because the Distance Marketing Directive3applies where there is "an organised distance sales or service-provision scheme run by the supplier" (Article 2(a)), i.e. if the credit union routinely sells any of its services by post, telephone, fax or the internet3.

Supervision manual (SUP)

The following provisions of SUP are relevant to credit unions: 13SUP 1A13 (The FCA’s 3 approach to supervision), SUP 2 (Information gathering by the FCA or PRA 3 on its own initiative), SUP 3.1 to SUP 3.8 (Auditors), SUP 5 (Skilled persons), SUP 6 (Applications to vary or cancel Part 4A12permission), SUP 7 (Individual requirements), SUP 8 (Waiver and modification of rules), SUP 9 (Individual guidance), 13SUP 10C (FCA senior management regime for approved persons in relevant authorised persons),3SUP 11 (Controllers and Close links), SUP 15 (Notifications to the FCA or PRA 3) and SUP 16 (Reporting Requirements).

Credit unions are reminded that they are subject to the requirements of the Act and SUP 11 on close links, and are bound to notify the FCA3 of changes. It may be unlikely, in practice, that credit unions will develop such relationships. It is possible, however, that a person may acquire close links with a 3credit union3 within the meaning of the Act by reason of holding the prescribed proportion of deferred shares in the credit union.

In relation to SUP 16, credit unions are exempted from the requirement to submit annual reports of 3close links.

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3Consumer Credit sourcebook (CONC)

CONC contains rules that apply to firms carrying on credit-related regulated activities. PERG 2.7.19IG provides guidance on relevant exemptions. Most credit union lending is therefore outside the scope of CONC. However, subject to the constraints in the Credit Unions Act 1979 or the Credit Unions (Northern Ireland) Order 1985 (as relevant), credit unions may undertake credit-related regulated activities to which CONC does apply if the activity is carried out by way of business. This could include lending under a borrower-lender-supplier agreement, or debt adjusting or debt counselling where the credit union is not the lender. A credit union carrying on such activities should consider whether it requires permission to do so. Further information can be found on the FCA’s website.

Decision, Procedure and Penalties manual (DEPP)

DEPP is relevant to credit unions because it sets out:

(1) the FCA's12 decision-making procedure for giving statutory notices. These are warning notices, decision notices and supervisory notices (DEPP 1.2 to DEPP 5); and

(2) the FCA's12 policy with respect to the imposition and amount of penalties under the Act (see DEPP 6).

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Dispute Resolution: Complaints (DISP)

DISP sets out rules and guidance in relation to treating complainants fairly and the Financial Ombudsman Service.

Compensation (COMP)

COMP sets out rules relating to the scheme for compensating consumers when authorised firms are unable, or likely to be unable, to satisfy claims against them.12

6General guidance on Benchmark Administration, Contribution and Use (BENCH)

BENCH provides guidance about which parts of the Handbook are relevant to a firm when carrying out benchmark activities and when using a benchmark. It also provides guidance about the benchmarks regulation.

The Enforcement Guide (EG)

The Enforcement Guide (EG) describes the FCA's12 approach to exercising the main enforcement powers given to it by the Act and by other legislation.2

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Financial crime: a guide for firms (FC)

FC provides guidance on steps that a firm can take to reduce the risk that it might be used to further financial crime.