Related provisions for CONC 7.17.6
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(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:1(-a) any fee or charge payable by the borrower to a credit broker in connection with the agreement (if the fee or charge is known to the lender);1(a)
1The total cost of credit to the borrower includes fee or charge payable by the borrower to a credit broker, if the fee or charge is known to the lender. CONC 4.4.2R(3) requires the credit broker to disclose their fee to the lender. Lenders should take reasonable steps to ascertain whether a fee is payable to the credit broker and, if so, the amount of the fee.
For the purposes of calculating the total charge for credit and the annual percentage rate of charge:2(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
2The assumptions set out in CONC App 1.2.5R are intended to ensure that the total charge for credit and the annual percentage rate of charge are calculated in a consistent way to promote the comparability of different offers. The use of the term ‘where necessary’ in assumptions (c) to (o) in that rule makes clear that these assumptions only apply where they are necessary in relation to the specific agreement, for example, where key features such as the amount or duration of credit
This table belongs to MCOB 8.1.1 R
(1) Category of firm |
(2) Applicable section |
| 4 | whole chapter except MCOB 8.5A5 and MCOB 8.74, MCOB 8.6A in accordance with MCOB 8.1.2A R5 |
| 4 | whole chapter MCOB 8.7 does not apply in relation to a lifetime mortgage4 5 |
| 4 | whole chapter except MCOB 8.5A.5MCOB 8.7 does not apply in relation to a lifetime mortgage4 5 |
(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
MCOB applies to regulated mortgage contracts. For certain categories of regulated mortgage contract, MCOB applies from the dates mentioned in MCOB 1.2.21G. A credit agreement secured on land5 that is not a regulated mortgage contract, for example because the borrower is not an individual or a trustee,5 may be a regulated credit agreement to which the CCA and CONC apply (see CONC 1.2.7G).542421
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,
6Under article 53(2) of the Regulated Activities Order (Advising on investments), advising a person is a specified kind of activity if:(1) the advice is given to the person in their capacity as a lender or potential lender under a relevant article 36H agreement (defined in article 53(4) of the Regulated Activities Order) or as an agent for a lender or potential lender under such an agreement; and(2) it is advice on the merits of their doing any of the following (whether as principal
4Under article 53DA of the Regulated Activities Order (Advising on regulated credit agreements for the acquisition of land), advising a person (“P”) is a specified kind of activity if:(1) the advice is given to P in P’s capacity as a recipient of credit, or potential recipient of credit, under a regulated credit agreement;(2) P intends to use the credit to acquire or retain property rights in land or in an existing or projected building; and(3) the advice consists of the provision
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, advising on regulated credit agreements for the acquisition of land4,9 or advising on conversion or transfer of pension benefits advising on a home finance transaction . Also, the general prohibition will not be contravened if the exclusion for overseas persons
If a person is carrying on the business of advising on investments, advising on regulated credit agreements for the acquisition of land,9 advising on a home finance transaction or advising on conversion or transfer of pension benefits9 in the United Kingdom, he will not require authorisation if:41(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
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, advising on regulated credit agreements for the acquisition of land,9advising on a home finance transaction1 or advising on conversion or transfer of pension benefits9 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
Subject to MCOB 14.1.5R and MCOB 14.1.7R: (1) MCD article 3(1)(b) creditors and MCD article 3(1)(b) credit intermediaries must comply with the following provisions in MCOB. These provisions apply with such changes as are necessary to apply them to MCD article 3(1)(b) credit agreements and activity undertaken in relation to those agreements (see MCOB 14.1.4G):(a) MCOB 1.2.19G (identifying MCD credit agreements);(b) MCOB 2.3 (inducements);(c) MCOB 2.5A (the customer’s best interests);(d)
The changes that MCOB 14.1.3R requires to be made to rules applied by that rule include the following:(1) any reference to ‘land’ includes a reference to property rights in an existing or projected building;(2) any reference to regulated mortgage contract or MCD regulated mortgage contract includes a reference to an MCD article 3(1)(b) credit agreement; and(3) any reference to qualifying credit includes a reference to an MCD article 3(1)(b) credit agreement.
(1) A firm should generally make one election under MCOB 14.1.5R for all of its MCD article (3)(1)(b) credit intermediation activity or all of its lending under MCD article 3(1)(b) credit agreements, at any given time.(2) Where a firm wishes to make different elections for different types of MCD article (3)(1)(b) credit intermediation activity or lending under MCD article 3(1)(b) credit agreements, it should maintain processes to ensure that the rules applicable to each type of
An MCD mortgage lender may request the consumer, family member or close relation of the consumer to:(1) open or maintain a payment or a savings account, where the only purpose of the account is to accumulate capital to repay the credit, to service the credit, to pool resources to obtain the credit, or to provide additional security for the MCD mortgage lender in the event of default;(2) purchase or keep an investment product or a private pension product, where such product primarily
An MCD mortgage lender may engage in tying practices where it can demonstrate to the FCA that the tied products or categories of product offered, on terms and conditions similar to each other, which are not made available separately, result in a clear benefit to the consumer taking due account of the availability and the prices of the relevant products offered on the market. This rule only applies to products which are marketed after 20 March 2014.[Note: article 12(3) of the
(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 an illustration in relation to a particular equity release transaction (see MCOB 5.5.1 R (2)(d))4, the firm must not delay the provision of the illustration by requesting information other than:34(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 to ascertain this;33(3) where the
(1) 1MCOB 8.6A provides that a firm may only enter into an equity release transaction with a customer, or arrange such a transaction for a customer, as an execution-only sale if the customer has rejected advice, identified the product he wishes to purchase and positively elected to proceed with an execution-only sale.(2) The aim of MCOB 8.6A is to ensure that, in all sales of equity release transactions, there is one firm which advises the customer on the equity release transaction
(1) The condition in MCOB 8.6A.4R (1) does not apply in the case of a variation of a lifetime mortgage, provided that:(a) the variation would not involve the customer taking on additional borrowing beyond the amount currently outstanding under the existing lifetime mortgage, other than to finance any product fee or arrangement fee for the proposed new or varied contract; and(b) where the variation will (in whole or part) change from one interest rate to another, the firm has presented
The required additional information in MCOB 8.6A.4R (2) is:(1) for a lifetime mortgage other than one falling within MCOB 8.6A.5 R:(a) the name of the mortgage lender;(b) the rate of interest;(c) the interest rate type;(d) the price or value of the property on which the lifetime mortgage would be secured (estimated where necessary); and(e) the sum the customer wishes to borrow under it, either immediately or in the future (including the amount of any lump sum, any regular drawdown
(1) Whenever a firmenters into or arranges an execution-only sale for an equity release transaction, it must make and maintain a record of:, (a) the required information provided by the customer which satisfies MCOB 8.6A.4R (2);(b) the information in durable medium in MCOB 8.6A.4R (3);(c) the confirmation by the customer in MCOB 8.6A.4R (4) (where applicable); and(d) any advice from the firm which the customer rejected, including the reasons why it was rejected, before deciding
5A contract is not a regulated mortgage contract if it is:(1) a loan to a commercial borrower excluded under PERG 4.4.17 G or PERG 4.4.21 G; or(2) a second charge loan by a credit union excluded under PERG 4.4.24 G; or(3) a second charge bridging loan excluded under PERG 4.4.27 G;66(4) a CBTL credit agreement excluded as described in PERG 4.4.31G.6
5A contract is excluded from the definition of regulated mortgage contract if, at the time it is entered into, it meets the following conditions:(1) it meets the conditions in PERG 4.4.1G (1) to (3); and(2) the lender is a credit union; and(3) it is a borrower-lender agreement; and(4) the mortgage ranks in priority behind one or more other mortgages affecting the land in question; and(5) the rate of the total charge for credit does not exceed 42.6 per cent.
5A contract is excluded from the definition of regulated mortgage contract if, at the time it is entered into, it meets the following conditions:(1) it meets the conditions in PERG 4.4.1G (1) to (3); and(2) it is a borrower-lender-supplier agreement financing the purchase of land; and(3) it is used by the borrower as a temporary financing solution while changing to another financial arrangement for the land secured by the mortgage; and(4) the mortgage ranks in priority behind
10A contract is excluded from the definition of regulated mortgage contract if, at the time is entered into, it meets the following conditions:(1) it provides for credit to be granted by a ‘housing authority’ within the meaning of article 60E of the Regulated Activities Order. The definition in article 60E includes housing associations registered under the relevant housing legislation (see PERG 2.7.19FAG);(2) if entered into on or after 21 March 2016:(a) it is an agreement of
5The two exclusions for loans to commercial borrowers (PERG 4.4.17 G and PERG 4.4.21 G) depend on the borrower not being a consumer. For these purposes, if an agreement includes a declaration which:(1) is made by the borrower; and(2) includes:(a) a statement 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;(b) a statement that the borrower understands that the borrower
5However, the presumption in PERG 4.4.29 G does not apply if, when the agreement is entered into:(1) the lender (or, if there is more than one lender, any of the lenders); or(2) any person who has acted on behalf of the lender (or, if there is more than one lender, any of the lenders) in connection with the entering into of the agreement;knows, or has reasonable cause to suspect, that the agreement is not entered into by the borrower wholly or predominantly for the purposes of
For a buy-to-let credit agreement (described in PERG 4.10B.5G), article 61A(5) of the Regulated Activities Order says that a borrower is to be regarded as entering into an agreement, or intending to enter into an agreement, for the purposes of a business if (1) or (2) are met:6(1) (a) the borrower previously purchased, or is entering into the contract in order to finance the purchase by the borrower of, the land secured by the mortgage;6(b) at the time of the purchase the borrower
A firm must not unfairly encourage, incentivise or induce a customer to enter into a regulated credit agreement quickly without allowing the customer time to consider the pre-contract information under section 55 of the CCA and the explanations provided under CONC 4.2.5 R.[Note: paragraph 5.10 of ILG]
(1) A firm must not give a person a credit token if he has not asked for it.[Note: section 51 of CCA](2) A request in (1) must be in a document signed by the person making the request, unless the credit-token agreement is a small borrower-lender-supplier agreement.(3) Paragraph (1) does not apply to the giving of a credit token to a person:(a) for use under a credit-token agreement already made; or (b) in renewal or replacement of a credit token previously accepted by that person
(1) 2CONC does not apply to credit agreements secured on land, with some limited exceptions as set out in (3) and (4), below. (2) Agreements secured by a second or subsequent charge on the customer’s home are, where regulated, governed by MCOB from 21 March 2016 (subject to transitional provisions allowing for the earlier adoption of MCOB). For detailed guidance on the regulation of secured lending, see PERG 4.(3) The agreements secured on land to which CONC may apply include
(1) 2CONC 1.2.8R and the rules applied by CONC 1.2.8R do not apply to an MCD article 3(1)(b) creditor or MCD article 3(1)(b) credit intermediary where the MCD article 3(1)(b) credit agreement would be an exempt agreement pursuant to article 60H(1) of the Regulated Activities Order but for:(a) paragraph (1)(b)(ii)(bb) of article 60H of the Regulated Activities Order (which relates to high net worth borrowers); or(b) article 60HA of the Regulated Activities Order (exemptions not
2The purpose of CONC 1.2.10R(1)(a) is to enable a high net worth borrower under an MCD article 3(1)(b) credit agreement to waive the protections and remedies applicable to regulated credit agreements, except for those that transpose or implement the MCD. The MCD does not contain an exemption or derogation in respect of borrowing above a certain amount, unlike the Consumer Credit Directive: the EUR75,000 threshold in that Directive has been implemented in the form of the exemption
For the purposes of this chapter, the total charge for credit which may be provided under an actual or prospective agreement is the total (determined as at the date of the making of the agreement) of the charges specified in MCOB 10.4.2 R which apply in relation to the agreement, but excluding the charges specified in MCOB 10.4.4 R.
The amounts of the following charges are included in the total charge for credit in relation to an agreement, with the exceptions in MCOB 10.4.4 R:(1) the total of the interest on the credit which may be provided under the agreement; (2) other charges at any time payable under the transaction by or on behalf of the customer, whether to the firm or any other person; and(3) a premium under a contract of insurance, payable under the transaction by the customer, where the making or
(1) MCOB 10.4.2 R means, for example, that the following charges must be included within the total charge for credit:(a) any fee payable to a mortgage intermediary for arranging the contract (see MCOB 10.4.2 R(2)); and(b) any higher lending charge.(2) The FCA takes the view that charges required to be included within the total charge for credit should not be excluded on the basis of these charges being refundable in certain circumstances. (3) The FCA also takes the view that the
(1) The amounts of the following items are not included in the total charge for credit in relation to an agreement:(a) any charge payable under the transaction to the firm upon failure by the customer to do or to refrain from doing anything which he is required to do or to refrain from doing;(b) any charge:(i) which is payable by the firm to any person upon failure by the customer to do or to refrain from doing anything which he is required under the transaction to do or to refrain
But the exclusion applies only if the principal purpose of the publication or service is not:(1) to advise on securities or structured deposits9 or relevant investments or P2P agreements or7home finance transactions1 or amounts to carrying9 on advising on conversion or transfer of pension benefits; 5 or15(2) to lead or enable persons:(a) to buy, sell, subscribe for or underwrite securities, structured deposits9 or relevant investments; or1(aa) to enter into a relevant article
(1) There are two specified formats for advice appearing in writing or other legible form.(2) The first is that of a newspaper, journal, magazine or other periodical publication. For these purposes it does not matter what form the periodical publication takes as long as it can be read. This will include, for example, a newspaper appearing as a hard copy or electronically on a website. It will also include any periodical published on an intranet site.(3) The second is that of a
The exclusion applies only if the principal purpose of the publication or service is not:(1) to give advice on securities, structured deposits,9relevant investments, P2P agreements7 or home finance transactions1or amounts to carrying on advising on conversion or transfer of pension benefits9; or1(2) to lead or enable persons6:(a) to6buy, sell, subscribe for or underwrite securities, structured deposits9 or relevant investments; or(aa) to enter into a relevant article 36H agreement
Looking at the first disqualifying purpose set out in the exclusion, all the matters relevant to whether the regulated activities of advising on investments, advising on regulated credit agreements for the acquisition of land,9advising on a home finance transaction or advising on conversion or transfer of pension benefits9 are being carried on must be taken into account (see PERG 8.24 (Advising on investments)). If the principal purpose of a publication or service is to give to
For the second disqualifying purpose, the focus switches to assessing whether the principal purpose of a publication or service is to lead a person to engage in a relevant transaction or enable him to do so. This disqualifying purpose is an alternative to the first. So it extends to material not covered by the first. In this respect:(1) material in a publication or service that invites or seeks to procure persons to engage in a relevant transaction can be said to "lead" to those
This section applies:(1) to a firm with respect to consumer credit lending; and(2) where a firm has entered into a current account agreement where:(a) there is a possibility that the account-holder may be allowed to overdraw on the current account without a pre-arranged overdraft or exceed a pre-arranged overdraft limit; and (b) if the account-holder did so, this would be a regulated credit agreement.
(1) A firm must inform the account-holder in writing of the matters in (2) without delay where:(a) the account-holder overdraws on the current account without a pre-arranged overdraft, or exceeds a pre-arranged overdraft limit, for a period exceeding one month; (b) the amount of that overdraft or excess is significant throughout that period; (c) the overdraft or excess is a regulated credit agreement; and(d) the account-holder has not been informed in writing of the matters in
The amount referred to in MCOB 5.6.6 R(2) is:(1) in cases where on the basis of the information obtained from the customer before providing the illustration it is clear that the customer would not be eligible to borrow the amount he requested, an estimate of the amount that the customer could borrow based on the information obtained from the customer; or(2) where the regulated mortgage contract is a revolving credit agreement such as a secured overdraft or mortgage credit card:4(a)
Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has an agreed term for repayment and a regular payment plan (that is, it is not a revolving credit agreement such as a secured overdraft or mortgage credit card, or a regulated mortgage contract where all of the interest rolls up, such as an open-ended bridging loan9):9(1) the following text must be included in the illustration: 'The overall cost takes into account the payments in Sections
Under the section heading 'Overall cost of this mortgage' where the regulated mortgage contract has no agreed term for repayment, (and a 12 month term has been assumed), or no regular payment plan, or both (for example, a revolving credit agreement such as a secured overdraft or mortgage credit card or a regulated mortgage contract where all the interest rolls up such as an open-ended bridging loan9):9(1) the following text must be included in the illustration: 'The overall cost
(1) The APR and the total amount payable in MCOB 5.6.34 R must be calculated on the basis of information obtained from the customer under MCOB 5.6.6 R.(2) Where there is a charge to be included in the APR and total amount payable and the precise amount of that charge is not known at the time that the illustration is provided, MCOB 10.3 (Formula for calculating the APR) sets out a number of relevant assumptions to be used. If the method for including the charge is not addressed
Under the sub-heading 'Credit card', the illustration must:(1) state if a credit card is offered with the regulated mortgage contract; and(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 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 5.6.92 R and these are credit facilities that do not meet the definition of a regulated mortgage contract or a regulated credit agreement10, the relevant parts of Section 12 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 5.6.92 R and these are credit facilities that meet the definition
Section 126(2) of the CCA (as inserted by the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2014) provides, however, that for the purposes of section 126(1) of the CCA (a land mortgage securing a regulated credit agreement is enforceable (so far as provided in relation to the agreement) on an order of the court only) and Part 9 of the CCA (judicial control) a regulated mortgage contract which would, but for the exemption in PERG 2.7.19CG(1),
2A number of Regulated Activities Order exclusions from the consumer credit regulated activities are relevant to lenders under loans secured on land. These include:(1) article 60C(2) (regulated mortgage contract is an exempt credit agreement, as summarised in PERG 2.7.19CG (1));(2) article 60C(3) (commercial lending, as summarised in PERG 2.7.19CG (2));(3) article 60D (loans secured on non-residential property, as summarised in PERG 2.7.19E G);(4) article 60F (loans with a limited
A firm which takes any article in pawn under a regulated credit agreement must keep such books or other records as are sufficient to show and explain readily at any time all dealings with the article, including: (1) the taking of the article in pawn;(2) any redemption of the article; and(3) where the article has become realisable by the firm, any sale of the article under section 121(1) of the CCA.[Note: regulation 2(1) of SI 1983/1565]
Where the entries in relation to any article taken in pawn in CONC 6.6.4 R are not shown together as a whole but are shown in separate places, then in each place where entries are made the record must show:(1) the date and the number or other reference of the agreement under which the article was taken in pawn and, where separate from any document embodying the agreement, the number or other reference of the pawn-receipt;(2) the date on which the article was taken in pawn; and(3)
What is a reasonable period for the borrower to repay the credit depends on the circumstances of the case, including the terms for repayment under the agreement. Where the agreement provided for repayment in instalments, the firm should consider issuing the borrower with a schedule for repayment under which the firm would collect the credit in instalments at the same periodic intervals as under the agreement.
CONC 5A.5.3 R is a residual provision that applies to a firm established in the UK which carries on debt administration or debt collection, but where the rules in CONC 5A do not apply to a lender because the lender is established outside the UK and provides electronic commerce activities into the UK. Where a borrower gives notice to the lender referred to in CONC 5A.5.3 R, only charges which exceed the amounts set out in CONC 5A.2 or CONC 5A.3 are void. The borrower remains
(1) Before a P2P agreement is made, the firm must:(a) provide the prospective borrower with an adequate explanation of the matters referred to in (2) in order to place the borrower in a position to assess whether the agreement is adapted to the borrower's needs and financial situation;(b) where the P2P agreement is not a non-commercial agreement, advise the prospective borrower:(i) to consider the information which is required to be disclosed under section 55(1) of the CCA; and(ii)
(1) 1This rule applies if:(a) a firm with permission to carry on the activity of operating an electronic system in relation to lending is to facilitate the entry into a P2P agreement; (b) the prospective borrower is an individual; and(c) an individual other than the borrower (in this rule referred to as “the guarantor”) is to provide a guarantee or an indemnity (or both) in relation to the P2P agreement.(2) The firm must, before the P2P agreement is made, provide the guarantor