MCOB 4 Advising and selling standards

This chapter applies to a firm in a category listed in column (1) of the table in MCOB 4.1.2 R in accordance with column (2) of that table.

MCOB 4.8A only applies to a mortgage lender in relation to entering into a regulated mortgage contract where there is no firm which is arranging (bringing about) the regulated mortgage contract to which MCOB 4.8A applies.

MCOB 4.8A only applies to a home purchase provider (as provided in MCOB 4.10.9B R) in relation to entering into a home purchase plan where there is no firm which is arranging (bringing about) the home purchase plan to which MCOB 4.8A applies (as provided in MCOB 4.10.9B R).

This chapter applies if a firm in the course of carrying on a home finance activity: enters into, advises on or arranges a home finance transaction or a variation of the terms of a home finance transaction.

1. (1)

   MCOB 4.4A (Initial disclosure requirements) applies only in relation to varying the terms of a regulated mortgage contract entered into by the customer in any of the following ways:

   1. (a)

      adding or removing a party;

   2. (b)

      taking out a further advance; or

   3. (c)

      switching all or part of the regulated mortgage contract from one interest rate to another.

2. (2)

   Otherwise, this chapter, MCOB 4, applies in relation to any form of variation of a regulated mortgage contract.

In relation to an equity release transaction, this chapter is modified by MCOB 8 (Equity release: advising and selling standards).

Using the methods and at the times specified in this section, a firm must provide the customer with the following information:

1. (1)

    whether there are any limitations in the range of products that it will offer to the customer, and if so what those are;

2. (1A)

    [deleted]

3. (2)

    the basis on which the firm will be remunerated; and

4. (3)

    the availability of alternative finance options.

1. (1)

   The limitations in MCOB 4.4A.1 R include any limitations on the regulated mortgage contracts the firm will consider from within the relevant market. A firm which is offering services to a customer in respect of more than one type of relevant market must describe its services in relation to each such relevant market.

2. (2)

   For these purposes, there are two relevant markets for regulated mortgage contracts (apart from lifetime mortgages): one for regulated mortgage contracts that are not for a business purpose; and one for regulated mortgage contracts that are. A firm offering services in relation to loans for a business purpose must make that clear in its disclosure under MCOB 4.4A.1R (1).

3. (3)

   If a firm will not, as part of its services, consider direct deals, it need not treat that as a limitation in its product range, but the firm must tell the customer as part of the disclosure under MCOB 4.4A.1R (1) that it will not consider direct deals.

1. (1)

   If a firm is not offering to the customer products from an unlimited range from across the relevant market, in its disclosure on product range in MCOB 4.4A.1 R, the firm must:

   1. (a)

      where it is an MCD mortgage credit intermediary, list the names of all the mortgage lenders whose products it is offering; or

   2. (b)

      where it is not an MCD mortgage credit intermediary, either

      1. (i)

         comply with (a); or

      2. (ii)

         inform the customer of the number of mortgage lenders whose products it is offering and that he has the right to request a list of those mortgage lenders.

2. (2)

   If a customer requests the list in (1)(b)(ii), the firm must provide it in a durable medium as soon as possible following the request and in any event within five business days. The list must also indicate whether the firm offers all of the products generally available from each mortgage lender on the list.

3. (3)

   An MCD mortgage credit intermediary must only disclose that it is independent if its consideration of MCD regulated mortgage contracts across the market is unlimited.

   [Note: articles 15(1)(c) and 22(4) of the MCD]

1. (1)

   The information about the basis of remuneration required by MCOB 4.4A.1R (2) must include all relevant information, including the following details:

   1. (a)

      any fees which the firm will charge to the customer;

   2. (b)

      when any such fees will be payable and, if applicable, reimbursable; and

   3. (c)

      whether the firm will receive commission from the mortgage lender or another third party and, if applicable, whether any commission will be offset against any fees charged and the arrangements for doing so; and

      [Note: article 15(3) of the MCD]

   4. (d)

      for an MCD regulated mortgage contract, the amount of commissions or other inducements, or where the amount is not known at the time of disclosure, notification that the actual amount will be disclosed at a later stage in the ESIS.

      [Note: article 15(1)(g) of the MCD]

2. (2)

   The details in (1)(a) must be expressed, where possible, as a specific cash sum, but the following rules apply where this is not possible:

   1. (a)

      If the firm will charge a fee that is a percentage of another sum which is not yet known (such as, but not limited to, the amount to be borrowed), the firm must provide details of the percentage and a representative illustrative example which gives an amount as a cash sum.

   2. (b)

      If the firm will charge one of a range of possible cash fees, the firm must provide a description of the fee in terms which include the maximum and minimum possible fees as cash sums, and what factors will determine where in the range the fee will be.

   3. (c)

      If the firm will charge one of a range of fees that are a percentage of another sum which is not yet known (such as, but not limited to, the amount to be borrowed), the firm must provide details of the minimum and maximum percentages and a representative illustrative example which gives an amount as a cash sum, and set out what factors will determine where in the range the fee will be.

   4. (d)

      If the firm will charge an amount based on an hourly rate, but the number of hours to be spent on the customer's transaction is unknown, the firm must state the hourly rate in cash terms and set out what factors will determine how many hours it takes to provide the firm's services.

   5. (e)

      for an MCD regulated mortgage contract, if the firm will charge a fee calculated other than in line with 2(a) to (d), the firm must provide details of the method for calculating the fee.

      [Note: article 15(1)(e) of the MCD]

Where a customer is looking to increase the borrowing secured on a property which is the subject of an existing regulated mortgage contract, the firm must first inform the customer, either orally or in writing, that the following alternative finance options may be available and more appropriate for the customer:

1. (1)

   a further advance from the existing lender, unless the firm knows that the existing lender will not make a further advance to the customer;

2. (2)
   1. (a)

      a second charge regulated mortgage contract, where the firm would offer services in relation to a new first charge regulated mortgage contract;

   2. (b)

      a new first charge regulated mortgage contract, where the firm would offer services in relation to a second charge regulated mortgage contract; or

3. (3)

   unsecured lending.

Where a customer is looking to take out a retirement interest-only mortgage, the firm must inform the customer, either orally or in writing, that a lifetime mortgage may be available and more appropriate for the customer.

The information required by MCOB 4.4A.1 R, MCOB 4.4A.2 R, MCOB 4.4A.4R (1),MCOB 4.4A.8 R and MCOB 4.4A.8A R must be communicated clearly and prominently, and in doing so:

1. (1)

   an MCD mortgage adviser, or any other firm that is an MCD mortgage lender or an MCD mortgage arranger that provides advisory services within the meaning of article 4(21) of the MCD, must provide the information in MCOB 4.4A.1R(1) and (2) and MCOB 4.4A.8R(1)(a) and (2)(e) in a durable medium;

   1. (a)

      [deleted]

   2. (b)

      [deleted]

2. (1A)

   an MCD mortgage arranger (unless it is also acting as an MCD mortgage lender and carrying out a direct sale of the proposed regulated mortgage contract) must provide the information in MCOB 4.4A.1R(1) and (2), MCOB 4.4A.4R(1)(a) and (3), and MCOB 4.4A.8R(1)(a), (c), (d) and (2) in a durable medium; and

3. (2)

   in all other cases:

   1. (a)

      if the initial contact includes spoken interaction, the information must be communicated orally; and

   2. (b)

      if the initial contact does not include spoken interaction, the messages must appear separately from other messages in the communication.

If the initial contact is made by electronic means, the firm must ensure that the customer cannot progress to the next stage of the sale unless the information has been communicated to the customer.

[Note: article 15(1) and article 22(2) of the MCD]

The information required by MCOB 4.4A.1 R, MCOB 4.4A.2 R, MCOB 4.4A.4R(1) and (3), MCOB 4.4A.8 R and MCOB 4.4A.8A R must be provided:

1. (1)

   in the case of information required by MCOB 4.4A.1R (1) and MCOB 4.4A.1R (2), MCOB 4.4A.4R (1)(a) and (3), and MCOB 4.4A.8R (1)(a), (c),(d) and (2), where the firm is an MCD credit intermediary, in good time before carrying out any MCD credit intermediation activity;

2. (1A)

   in the case of information required by MCOB 4.4A.1R(1) and (2) and MCOB 4.4A.8R(1)(a) and (2)(e), where the firm is an MCD mortgage adviser, or any other firm that is an MCD mortgage lender or an MCD mortgage arranger that provides advisory services within the meaning of article 4(21) of the MCD, before the provision of such advisory services or, where applicable, the conclusion of a contract for the provision of such advisory services; and

3. (2)

   in all other cases, during the course of the initial contact.

[Note: article 15(1) and article 22(2) of the MCD]

The information requirements in MCOB 4.4A.1 R, MCOB 4.4A.2 R, MCOB 4.4A.4R (1) and MCOB 4.4A.8 R do not apply where:

1. (1)

   the information has already been provided by the firm and the firm has good reason to believe that it is still accurate and appropriate for the customer; or

2. (2)

   the information has already been provided by the firm which first made contact with the customer in respect of the particular regulated mortgage contract, and the firm subsequently making contact with the customer does not expect to alter or replace the product range or basis of remuneration described in that information.

If the initial contact is by telephone, then the firm must also, before proceeding further, give the name of the firm and (if the call is initiated by or on behalf of the firm) the commercial purpose of the call.

Where a firm provides services to a consumer by way of a distance contract, the firm must provide the consumer with the following information in a durable medium in good time before the distance contract has been agreed:

1. (1)

   the information which is required by MCOB 4.4A.1 R to MCOB 4.4A.8A R;

2. (2)

   whether or not the firm will be providing the consumer with advice;

3. (3)

   the name and the main business of the firm, the geographical address at which it is established and any other geographical address relevant for the consumer's relations with the firm;

4. (4)

   an appropriate statutory status disclosure statement (see GEN 4), a statement that the firm is on the Financial Services Register and its FCA registration number;

5. (5)

   the total price to be paid by the consumer to the firm for the financial service, including all related fees, charges and expenses, and all taxes paid through the firm or, when an exact price cannot be indicated, the basis for the calculation of the price enabling the consumer to verify it;

6. (6)

   the arrangements for payment and for performance;

7. (7)

   how to complain to the firm, whether complaints may subsequently be referred to the Financial Ombudsman Service and, if so, the methods for having access to it, together with equivalent information about any other applicable named complaints scheme;

8. (8)

   whether compensation may be available from the compensation scheme, or any other named compensation scheme, if the firm is unable to meet its liabilities, and information about any other applicable named compensation scheme; and

9. (9)

   any other contractual terms and conditions of the distance contract.

1. (1)

   If at the point that initial disclosure must be made in accordance with MCOB 4.4A.1 R, MCOB 4.4A.2 R, MCOB 4.4A.4 R,MCOB 4.4A.8 R and MCOB 4.4A.8A R a firm is uncertain whether the contract will be a regulated mortgage contract, the firm must:

   1. (a)

      make the initial disclosure; or

   2. (b)

      seek to obtain from the customer information that will enable the firm to ascertain whether the contract will be a regulated mortgage contract.

2. (2)

   Where (1)(b) applies, the initial disclosure must be made unless, on the basis of the information provided by the customer, the firm has reasonable evidence that the contract is not a regulated mortgage contract.

A firm may restrict the home finance transactions it authorises a particular appointed representative to sell. If it does so, the firm must ensure the appointed representative reflects this limited range in any disclosure given to the customer under MCOB 4.4A.

If the initial contact is with a consumer with a view to concluding a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract, a firm must:

1. (1)

   in addition to initial disclosure information and any other required information, provide the consumer with the information in MCOB 4 Annex 3 in a durable medium in good time before the conclusion of the distance mortgage mediation contract, distance home purchase mediation contract or distance regulated sale and rent back mediation contract

   with that customer unless an exemption in (2), (3), (4) or (5) applies.

2. (2)

   Exemption: telephone sales

   1. (a)

      This exemption applies if the service is being provided on the telephone and the customer wishes to enter into a contract with the firm. Provided the customer gives his explicit consent to receiving only limited information, the firm may proceed on the basis of at least the following information:

      1. (i)

         the name of the person in contact with the customer and his link with the firm;

      2. (ii)

         the total price to be paid by the customer to the firm for the services, including all related fees, charges and expenses, and all taxes paid through the firm or, where an exact price cannot be indicated, the basis for the calculation of the price, enabling the customer to verify it;

      3. (iii)

         notice of the possibility that other taxes or costs may exist that are not paid through the firm or imposed by it;

      4. (iv)

         the information about cancellation rights set out in MCOB 4 Annex 3(5); and

      5. (v)

         that other information is available on request, and the nature of that information.

   2. (aa)

      If the customer does not give his explicit consent to receiving limited information, and the parties wish to proceed by telephone, the firm must, prior to the conclusion of the contract, provide orally to the customer all of the information required by (1).

   3. (b)

      Where (a) or (aa) applies, the firm must send the consumer without delay and, at the latest immediately after a contract is concluded, the information required by (1), in a durable medium.

3. (3)

   Exemption: certain other means of distance communication. This exemption applies if the contract is concluded at the consumer's request using a means of distance communication (other than telephone) which does not enable provision of the information referred to in MCOB 4 Annex 3 in a durable medium before the conclusion of the contract. In that case, the firm must provide the consumer with the information in a durable medium immediately after its conclusion.

4. (4)

   Exemption: successive operations or separate operations under an initial service agreement. This exemption applies if the firm has an initial service agreement with the consumer and the contract is in relation to a successive operation or a separate operation of the same nature under that agreement.

5. (5)

   Exemption: other successive or separate operations This exemption applies if:

   1. (a)

      the firm has no initial service agreement with the consumer; and

   2. (b)

      the firm has performed an operation with the consumer within the last year; and

   3. (c)

      the contract is in relation to a successive operation or separate operation of the same nature.

1. (1)

   A consumer has a right to cancel a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract in accordance with this section.

2. (2)

   The right to cancel must be exercised within 14 days beginning on the later of:

   1. (a)

      the day of the conclusion of the contract; or

   2. (b)

      the day on which the consumer receives the contractual terms and conditions and other information required by MCOB 4.4 and MCOB 4.5.

A consumer who has a right to cancel a distance mortgage mediation contract, a distance home purchase mediation contract or a distance regulated sale and rent back mediation contract may, without giving any reason, cancel the contract by serving notice on the firm, before the expiry of the cancellation period in MCOB 4.6.4 R either:

1. (1)

   by serving on, or otherwise sending by post, notice to the firm's last known address, addressed to the firm, its appointed representative or on any agent of the firm with authority to accept notice on the firm's behalf; or

2. (2)

   in accordance with any other practical instructions for exercising that right provided to the consumer in accordance with MCOB 4 Annex 3(5).

Where the notice of cancellation is in a durable medium and is served in accordance with MCOB 4.6.5 R, it must be treated as being served on the firm on the date it is despatched by the consumer.

By exercising a right to cancel under MCOB 4.6.4 R the consumer withdraws from the contract and the entire contract is terminated.

When a consumer exercises a right to cancel under MCOB 4.6.4 R:

1. (1)

   the firm must:

   1. (a)

      pay to the consumer without delay, and no later than 30 days after the date on which the firm received notice of cancellation from him, any sums which he has paid to or for the benefit of the firm in connection with the contract (including sums paid by the consumer to agents of the firm) except for the amount referred to in (b);

   2. (b)

      subject to (c), the firm is permitted to require the consumer to pay for the services it has actually provided in connection with the contract; the amount payable, however, must be in accordance with the sums which the consumer agreed to pay and must not:

      1. (i)

         exceed an amount which is in proportion to the extent of the service already provided to the consumer by the firm; and

      2. (ii)

         be such that it could be construed as a penalty;

   3. (c)

      sub-paragraph (b) applies only if:

      1. (i)

         where performance of the contract has commenced before expiry of the cancellation period, this was requested by the consumer; and

      2. (ii)

         the firm can demonstrate that the consumer was provided with details of the amount which he may be required to pay if exercising his right to cancel in accordance with MCOB 4 Annex 3(5).

2. (2)

   The firm is entitled to receive without delay, and no later than 30 days after the date on which the consumer posted or otherwise sent notice of cancellation to the firm any property that became the consumer's under the contract and any sums payable to the firm under (1)(b).

Where notice of cancellation has been served on a firm (or its appointed representative or agent), the firm must make and retain a record (which includes a copy of any receipt of notice issued to the consumer and the consumer's original notice instructions) for three years from the date when the firm first became aware that notice of cancellation had been served.

A mortgage lender may not offer a regulated mortgage contract to a customer on the basis that fees or charges of any kind (receivable either by the mortgage lender or another party) are automatically added to the sum advanced.

A firm must not undertake any action that commits a customer to an application for a regulated mortgage contract where a fee or charge of any kind (receivable either by the firm or another party) is to be added to the sum advanced under the regulated mortgage contract, unless the customer has made a positive choice to add the fee or charge to the sum advanced.

If a firm gives advice to a particular customer to enter into a regulated mortgage contract, or to vary an existing regulated mortgage contract, it must take reasonable steps to ensure that the regulated mortgage contract is, or after the variation will be, suitable for that customer.

In MCOB 4.7A, a reference to advice to enter into a regulated mortgage contract is to be read as including advice to vary an existing regulated mortgage contract.

For the purposes of MCOB 4.7A.2 R:

1. (1)

   a regulated mortgage contract will not be suitable for a customer unless the regulated mortgage contract is appropriate to the needs and circumstances of the customer;

2. (2)

   a firm must base its determination of whether a regulated mortgage contract is appropriate to a customer's needs and circumstances on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;

3. (3)

   no advice must be given to a customer to enter into a regulated mortgage contract if there is no regulated mortgage contract which is suitable from the product range offered by the firm; and

4. (4)

   if a mortgage lender is dealing with an existing customer with a payment shortfall and has concluded that there is no suitable replacement regulated mortgage contract, the firm must nonetheless have regard to MCOB 13.3.

When a firm assesses whether the regulated mortgage contract is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.7A.5R (1), the factors it must consider include the following, insofar as relevant:

1. (1)

   whether the customer's requirements appear to be within the mortgage lender's known eligibility criteria for the regulated mortgage contract;

2. (2)

   whether it is appropriate for the customer to have an interest-only mortgage, a repayment mortgage, or a combination of the two;

3. (3)

   whether it is appropriate for the customer to take out a regulated mortgage contract for a particular term;

4. (4)

   whether it is appropriate for the customer to have stability in the amount of required payments, especially having regard to the impact on the customer of significant interest rate changes in the future;

5. (5)

   whether it is appropriate for the customer to have their payments minimised at the outset;

6. (6)

   whether it is appropriate for the customer to make early repayments;

7. (7)

   whether it is appropriate for the customer to have any other features of a regulated mortgage contract;

8. (8)

   whether the regulated mortgage contract is appropriate, based on the information provided by the customer as to his credit history; and

9. (9)

   whether it is appropriate for the customer to pay any fees or charges in relation to the regulated mortgage contract up front, rather than adding them to the sum advanced (see also MCOB 4.6A.2 R).

In relation to MCOB 4.7A.6R (2), where a firm has identified an interest-only mortgage as appropriate for a customer, the firm must ensure that the customer is aware that he will have to demonstrate to the mortgage lender that he will have in place a clearly understood and credible repayment strategy, in order for the mortgage lender to be able to satisfy MCOB 11.6.41R (1).

1. (1)

   In considering whether a retirement interest-only mortgage that will be used to release capital is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.7A.2R, a firm must consider, in addition to the factors set out in MCOB 4.7A.6R, whether the benefits to the customer outweigh any adverse effect on:

   1. (a)

      the customer’s entitlement (if any) to means-tested benefits; and

   2. (b)

      the customer’s tax position.

2. (2)

   In considering the factors set out in MCOB 4.7A.10AR(1), where a firm has insufficient knowledge of the customer’s means-tested benefits or tax allowances to reach a conclusion, the firm must refer the customer to an appropriate source or sources such as the Pension Service, HM Revenue and Customs or a Citizens Advice Bureau (or other similar agency) to establish the required information.

3. (3)

   If a customer declines to seek further information on means-tested benefits, tax allowances or the scope for local authority (or other) grants, a firm can advise the customer (in accordance with the remaining requirements of this chapter) to enter into a retirement interest-only mortgage where there is a retirement interest-only mortgage that is appropriate to the needs and circumstances of the customer; but must confirm to the customer, in a durable medium, the basis on which the advice has been given.

When a firm assesses whether a bridging loan is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.7A.5R (1), the factors it must consider include, in addition to the factors listed at MCOB 4.7A.6 R:

1. (1)

   whether it is appropriate for the customer to make regular payments; and

2. (2)

   whether it is appropriate for the customer to access finance quickly.

Where a firm has identified a bridging loan as appropriate for a customer, the firm must ensure that the customer is aware that he will have to demonstrate to themortgage lender that he has a clearly understood and credible repayment strategy in place.

Where a firm is considering giving advice to a customer to enter into a bridging loan, the reasonable steps in MCOB 4.7A.2 R include considering why it is not appropriate for the customer to take out a regulated mortgage contract which is not a bridging loan.

When a firm assesses whether a shared equity credit agreement is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.7A.5R (1) it must consider, in addition to the factors listed in MCOB 4.7A.6 R, whether it is appropriate for the customer to:

1. (1)

   take out the shared equity credit agreement for a particular term, taking into account the customer's intentions about the repayment of that shared equity credit agreement and the term of the customer's associated first charge regulated mortgage contract;

2. (2)

   have flexibility over the payment of interest;

3. (3)

   have flexibility over the repayment of capital; and

4. (4)

   purchase a property by using his own resources, rather than by borrowing under the shared equity credit agreement.

When a firm advises a customer in relation to entering into a regulated mortgage contract where the main purpose for doing so is the consolidation of existing debts by the customer, in addition to the factors at MCOB 4.7A.6 R, it must also take account of the following, where relevant, in assessing whether the regulated mortgage contract is suitable for the customer:

1. (1)

   the costs associated with increasing the period over which a debt is to be repaid;

2. (2)

   whether it is appropriate for the customer to secure a previously unsecured loan; and

3. (3)

   where the customer is known to have payment difficulties, whether it would be appropriate for the customer to negotiate an arrangement with his creditors rather than to take out a regulated mortgage contract.

When advising a customer on the suitability of a regulated mortgage contract, a firm must explain to the customer that the assessment of whether the regulated mortgage contract is appropriate to his needs and circumstances is based only on the customer's current circumstances and any reasonably foreseeable changes to those.

1. (1)

   This rule applies if the firm’s product range includes more than one regulated mortgage contract that is appropriate to the needs and circumstances of the customer (see MCOB 4.7A.5R and 4.7A.6R).

2. (2)

   If:

   1. (a)

      the firm advises the customer to enter into a particular regulated mortgage contract; and

   2. (b)

      that regulated mortgage contract is not the cheapest of those contracts in the firm’s product range which are appropriate to the needs and circumstances of the customer;

   the firm must explain to the customer why it is advising the customer to enter into that regulated mortgage contract rather than any other cheaper regulated mortgage contract in the firm’s product range which is appropriate to the needs and circumstances of the customer.

3. (3)

   For the purposes of this rule:

   1. (a)

      one regulated mortgage contract (“contract A”) is cheaper than another (“contract B”) if the total amount payable under contract A in respect of the relevant period is less than the total amount payable under contract B in respect of the relevant period;

   2. (b)

      the “total amount payable” means:

      1. (i)

         the aggregated monthly payments; and

      2. (ii)

         includes any product fee or arrangement fee if the customer proposes to pay that fee directly rather than add it to the sum advanced under the contract (and such a fee must be treated in the same way for contract A and contract B when comparing the two contracts);

   3. (c)

      the “relevant period” means:

      1. (i)

         any discounted or introductory period under contract A; or

      2. (ii)

         the term of contract A; and

   4. (d)

      monthly payments should be calculated on the assumption that there is no variation to the interest rate that would apply if the regulated mortgage contract were to be entered into immediately, unless the contract expressly varies the interest rate (in which case, the monthly payments should be calculated by reference to rates specified in the contract in relation to the relevant periods).

If a customer has rejected the advice given by a firm and instead wishes to enter into a different regulated mortgage contract as an execution-only sale, the firm may enter into or arrange that contract as an execution-only sale provided the requirements in MCOB 4.8A.14 R are satisfied.

1. (1)

   A firm must make and retain a record:

   1. (a)

      of the customer information, including that relating to the customer's needs and circumstances, that it has obtained for the purposes of MCOB 4.7A;

   2. (b)

      that explains why the firm has concluded that any advice given to a customer complies with MCOB 4.7A.2 R and satisfies the suitability requirement in MCOB 4.7A.5R (1);

   3. (c)

      of the customer's positive choice in MCOB 4.6A.2 R (Rolling up of fees or charges into loan) where applicable; and

   4. (d)

      of the explanation given under MCOB 4.7A.23AR where applicable.

2. (2)

   The records in (1) must be retained for a minimum of three years from the date on which the advice or explanation was given or, in the case of (1) (c), the making of the choice.

A firm must not encourage a customer to opt out of receiving advice on regulated mortgage contracts from, or reject advice given by, it or any associate.

A firm must not enter into or arrange an execution-only sale for a regulated mortgage contract if:

1. (1)

    the customer is intending to use it to exercise a statutory “right to buy” the customer's home; or

2. (2)

    the main purpose of the customer's entering into it is to raise funds for debt consolidation; or

3. (3)

    [deleted]

4. (4)

    the regulated mortgage contract is a shared equity credit agreement.

MCOB 4.8A.7R does not apply where the customer is a high net worth mortgage customer.

1. (1)

   MCOB 4.8A.7 R does not apply in the case of a variation of a regulated mortgage contract, provided that:

   1. (a)

       the variation would not involve the customer taking on additional borrowing beyond the amount currently outstanding under the existing regulated mortgage contract, other than to finance any product fee or arrangement fee for the proposed new or varied contract;

   2. (b)

       where the variation will (in whole or part) change from one interest rate to another, the firm has presented to the customer all products offered by it for which the customer is eligible; and

2. (2)

    The reference to a variation in (1) (and in all other provisions which cross-refer to this rule) must be read as including any new regulated mortgage contract which would replace an existing regulated mortgage contract between the customer (or, where there are joint borrowers, at least one of them) and the firm (either as the original mortgage lender or as the transferee of the existing contract).

3. (3)

    [deleted]

MCOB 4.8A.7 R does not apply where the customer has rejected advice given by a firm and instead wishes to enter into a different regulated mortgage contract as an execution-only sale (see MCOB 4.8A.14 R).

A firm must not enter into or arrange an execution-only sale for a regulated mortgage contract unless, except as provided in MCOB 4.8A.15R:

1. (1)

    for a new regulated mortgage contract not falling within MCOB 4.8A.10R, the customer has identified the regulated mortgage contract they wish to purchase, specifying to the firm at least the following information:

   1. (a)

       the name of the mortgage lender;

   2. (b)

       the rate of interest;

   3. (c)

       the interest rate type (that is, whether fixed, variable or some other type);

   4. (d)

       the price or value of the property on which the regulated mortgage contract would be secured (estimated where necessary);

   5. (e)

       the length of the term required by the customer;

   6. (f)

       the sum the customer wishes to borrow; and

   7. (g)

       whether the customer wants an interest-only mortgage or a repayment mortgage;

2. (2)

    for a contract variation not falling within MCOB 4.8A.10R (but permitted by MCOB 4.8A.7R), the customer has specified at least the following information, where applicable to the variation they wish to enter into:

   1. (a)

       the price or value of the property;

   2. (b)

       the length of term required (or confirmation that this should remain unchanged); and

   3. (c)

       the amount the customer wishes to borrow;

3. (3)

    for a contract variation falling within MCOB 4.8A.10R, the customer has specified the variation they wish to enter into;

4. (4)

    the customer has been informed, either clearly and prominently and in a durable medium or in an oral statement that is audio or video recorded (after providing the information in (1), (2), or (3), where that is required), and with the information required by this paragraph being separate from any other information or contractual documentation):

   1. (a)

       in any case falling within MCOB 4.7A.24R (Rejected advice) where the firm has advised the customer that the regulated mortgage contract (or variation) is unsuitable for the customer, that that is the case; or

   2. (b)

       in any other case, that in the provision of its services for the execution-only sale the firm is not required to assess the suitability of that regulated mortgage contract (or variation);

5. and in either case that the customer will not benefit from the protection of the rules (in MCOB 4.7A) on assessing suitability. In any case where there is spoken dialogue between the firm and the customer at any point during the sale, the firm must provide this information orally (even if it also provides it in a durable medium); and

6. (5)

    once the customer has been provided with the information in (4), in any case where there is spoken or other interactive dialogue between the firm and the customer at any point during the sale, the customer has confirmed in writing to the firm, or has confirmed orally to the firm (and that confirmation is audio or video recorded), that they are aware of the consequences of losing the protections of the rules on assessing suitability and are making a positive election to proceed with an execution-only sale.

The requirements in MCOB 4.8A.14R (1) to (3) do not apply if the customer is a high net worth mortgage customer or entering into the regulated mortgage contract solely for a business purpose.

1. (1)

   Whenever a firm enters into or arranges an execution-only sale for a regulated mortgage contract, it must make and maintain a record of:

   1. (a)

      the information provided by the customer which satisfies MCOB 4.8A.14R (1), (2) or (3);

   2. (b)

      the provision of the information in MCOB 4.8A.14R (4);

   3. (c)

      (where applicable) the confirmation by the customer in MCOB 4.8A.14R (5); and

   4. (d)

      any advice from the firm which the customer rejected, including the reasons why it was rejected, before deciding to enter into an execution-only sale.

2. (2)

   The record in (1) must be retained for a minimum of three years from the date on which the regulated mortgage contract was entered into or arranged (or the variation was entered into or arranged).

3. (3)

   [deleted]

MCOB 4.8A does not apply to any variation which is made solely for the purposes of forbearance where the customer has a payment shortfall, or in order to avoid a payment shortfall.

A firm must comply with the rules in MCOB 4.4A as if the references in those rules to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers.

For the purposes of MCOB 4.4A.2R (1) there is one relevant market for home purchase plans.

If a firm gives advice to a particular customer to enter into a home purchase plan, or to vary an existing home purchase plan, it must take reasonable steps to ensure that the home purchase plan is, or after the variation will be, suitable for that customer.

In MCOB 4.10, a reference to advice to enter into a home purchase plan is to be read as including advice to vary an existing home purchase plan.

For the purposes of MCOB 4.10.5A R:

1. (1)

   a home purchase plan will not be suitable for a customer unless the home purchase plan is appropriate to the needs and circumstances of the customer;

2. (2)

   a firm must base its determination of whether a home purchase plan is appropriate to a customer's needs and circumstances on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;

3. (3)

   no advice must be given to a customer to enter into a home purchase plan if there is no home purchase plan which is suitable from the product range offered by the firm;

4. (4)

   if a home purchase provider is dealing with an existing customer in arrears, with a payment shortfall or otherwise in breach of their home purchase plan and has concluded that there is no suitable replacement home purchase plan, the firm must nonetheless have regard to MCOB 13.3; and

5. (5)

   the reasonable steps in that rule include considering why it is not appropriate for the customer to take out a regulated mortgage contract.

If a customer has rejected the advice given by a firm and instead requested an execution-only sale of a home purchase plan, the firm may enter into or arrange that execution-only sale provided the requirements in MCOB 4.8A.14 R (as applied in relation to home purchase plans by MCOB 4.10.9B R and modified for home purchase plans by MCOB 4.10.9D R) are satisfied.

MCOB 4.8A applies to a firm as if the references in that section to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers, but MCOB 4.8A.14R (1) and (2) are modified in relation to home purchase plans as set out in MCOB 4.10.9D R.

For home purchase plans, the following items of information replace those set out in MCOB 4.8A.14R (1) and (2):

1. (1)

   the name of the home purchase provider;

2. (2)

   the length of the term required by the customer; and

3. (3)

   the sum required from the home purchase provider.

A firm must, before advising a customer to enter into, or entering into or arranging a home purchase plan as an execution-only sale, ensure that the customer is, or has been, provided with an appropriate risks and features statement about that plan.

A risks and features statement need not be personalised to the customer's circumstances but must:

1. (1)

   include the Key facts logo in a prominent position at the top of the statement;

2. (2)

   state that the FCA requires a firm to provide the statement;

3. (3)

   state that mortgages are available and that the customer should think carefully about the product appropriate to his needs;

4. (4)

   describe the significant features of the plan, including:

   1. (a)

      how the home purchase plan works;

   2. (b)

      the nature of the customer's commitment;

   3. (c)

      when and how a customer's commitment is reviewed;

   4. (d)

      any significant restrictions of the plan; and

   5. (e)

      the charges that a customer may incur under the plan, including the reason for, and amount of, each charge, when they are payable, whether they will be reimbursed and, if so, when;

5. (5)

   describe the risks associated with the plan, including:

   1. (a)

      the risks to the customer if he fails to keep up repayments and the circumstances in which this might occur; and

   2. (b)

      risks to the customer of the home purchase provider failing or disposing of any of its obligations or rights (including its interest in the property) to a third party (taking into account steps that will be taken by the home purchase provider to mitigate such risks); and

6. (6)

   state the importance of obtaining independent legal advice.

A firm may omit details of the charges that a customer may incur under a home purchase plan from the risks and features statement if they are included in a separate tariff of charges provided to the customer at the same time.

1. (1)

   A firm must make and retain a record:

   1. (a)

      of the customer information, including that relating to the customer's needs and circumstances that it has obtained for the purposes of MCOB 4.10.5D R;

   2. (b)

      that explains why the firm has concluded that any advice given to a customer complies with MCOB 4.10.5A R and satisfies the suitability requirement in MCOB 4.10.5DR (1); and

   3. (c)

      of any advice which the customer has rejected, including the reasons why it was rejected and details of the home purchase plan which the customer has proceeded with as an execution-only sale.

2. (2)

   The records in (1) must be retained for a minimum of three years from the date on which the advice was given.

1. (1)

   A regulated sale and rent back firm, must make the following disclosures to a customer; both orally and in writing; during the initial contact:

   1. (a)

      the service the firm is offering the customer, making it clear whether the firm will be acting as a SRB agreement provider, a SRB adviser or a SRB arranger and the particular regulated sale and rent back activities for which the firm has a Part 4A permission;

   2. (b)

      if the firm is acting as an intermediary, whether it deals with a single or a range of SRB agreement providers and whether or not those providers are authorised under the Act; and

   3. (c)

      how much the firm will receive in connection with the transaction, whether by way of fees, commissions, charges, retentions or otherwise and whether any such sum will be payable out of the sale proceeds of the property, paid directly by the customer or provider or otherwise and whether or not any of these will be payable if the customer decides not to enter into a regulated sale and rent back agreement.

2. (2)

   If the precise fees, commissions, charges, retentions or other sums in (1)(c) are not known in advance, the firm should estimate the amount likely to apply in respect of the transaction.

1. (1)

   As soon as the customer expresses an interest in becoming a SRB agreement seller, a regulated sale and rent back firm must provide the customer with the MoneyHelper consumer factsheet on sale and rent back in a durable medium, which may be accessed through https://www.moneyhelper.org.uk.

2. (2)

   On providing the MoneyHelper consumer factsheet in (1) to the customer, the firm must give the customer an oral explanation of it, so as to ensure its contents are fully understood.

A regulated sale and rent back firm must not permit a potential SRB agreement seller to become contractually committed to enter into a regulated sale and rent back agreement unless it has reasonable grounds to be satisfied that a firm with permission to advise on regulated sale and rent back agreements has advised the particular customer to enter into it.

A firm must take reasonable steps to ensure that it does not advise a particular customer to enter into a regulated sale and rent back agreement unless the regulated sale and rent back agreement is suitable for that customer.

For the purposes of MCOB 4.11.3A R:

1. (1)

   a regulated sale and rent back agreement will not be suitable unless, having regard to the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware, the firm concludes on reasonable grounds that:

   1. (a)

      the customer can afford the payments he will be liable to make under it; and

   2. (b)

      the proposed regulated sale and rent back agreement is appropriate to the needs and circumstances of the customer;

2. (2)

   a firm must base its determination of whether a customer can afford the payments he will be liable to make under a regulated sale and rent back agreement, and whether it is appropriate to his needs and circumstances, on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;

3. (3)

   no advice must be given to a customer to enter into a regulated sale and rent back agreement if there is no regulated sale and rent back agreement which is suitable from within the product range offered by the firm.

In assessing whether the regulated sale and rent back agreement is appropriate to the needs and circumstances of the customer for the purposes of MCOB 4.11.3CR (1)(b), as a minimum requirement a firm must consider the following list of factors:

1. (1)

   whether it is appropriate for the customer to sell his property for a price less than its value (as determined by the valuation which is required by MCOB 6.9.2 R, including where applicable a valuation obtained by the SRB agreement seller as described in MCOB 6.9.2R (4)) (where this is proposed under the regulated sale and rent back agreement);

2. (2)

   whether it is appropriate for the customer because he is in financial difficulty;

3. (3)

   whether all other options have been explored and eliminated, including the customer speaking to his home finance provider and other creditors, getting debt advice, releasing the equity by other means and checking whether he is eligible for government or local authority help;

4. (4)

   whether it would be more appropriate for the customer to sell his home on the open market;

5. (5)

   whether the benefits to the customer in entering into the proposed regulated sale and rent back agreement outweigh any adverse effects it may have for him, including on his entitlement to means-tested benefits and housing benefits;

6. (6)

   the feasibility of the customer raising funds by alternative methods other than by a sale of his property; and

7. (7)

   if the customer is not under threat of repossession, why it is appropriate for the customer to take out a regulated sale and rent back agreement rather than to use an alternative method of finance.

1. (1)

   A firm must make and retain a record of the customer information that has been provided to it, including that relating to:

   1. (a)

      the customer's income, expenditure and other resources that it has obtained from him for the purpose of assessing affordability, together with the stress testing of the rental payments;

   2. (b)

      the customer's needs, objectives and individual circumstances that it has obtained from him for the purpose of assessing appropriateness; and

   3. (c)

      the customer's entitlement to means-tested benefits and housing benefits, including any evidence provided by the customer, that it has obtained from him for the affordability and appropriateness assessment;

   and which explains why the firm concluded that the regulated sale and rent back agreement was suitable for the customer and why it advised him to enter into it..

2. (2)

   The record in (1) must be retained for a minimum of five years from the date on which the assessment of suitability was made, or one year after the end of the fixed term of the tenancy agreement under the regulated sale and rent back agreement, if later.

A firm need not comply with the requirements imposed on a regulated sale and rent back firm in this section to the extent that it is satisfied on reasonable grounds that another firm, with the appropriate permission to do so, has already done so.