FCA Handbook - MCOB 5A.3 Information on MCD regulated mortgage contracts: general

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MCOB 5A.3 Information on MCD regulated mortgage contracts: general

Accuracy

A firm that is an MCD mortgage credit intermediary must take reasonable steps to ensure that an ESIS which it issues, or which is issued on its behalf, other than that provided by an MCD mortgage lender is accurate.

It is the responsibility of the firm to ensure compliance with MCOB 5A.3.1 R. However, where a firm can show that it was reasonable for it to rely on information provided by another person, other than the MCD mortgage lender, that an ESIS was accurate, it may be able to rely on MCOB 2.5.2 R, if this turns out not to be the case.

ESISs where consumer is ineligible

A firm must not issue an ESIS to a consumer for an MCD regulated mortgage contract for which the consumer is clearly ineligible on the basis of the information that the firm has obtained from the consumer or the MCD mortgage lender's lending criteria.

The purpose of MCOB 5A.3.3 R is not to require a firm to ascertain whether a consumer is eligible for a particular MCD regulated mortgage contract before providing an ESIS. Instead, the purpose is to ensure that the firm takes into account the information it has obtained from the consumer before providing an ESIS to the consumer.

Explaining the importance of an ESIS

In providing an ESIS to a consumer, a firm must explain to the consumer the importance of reading the ESIS and understanding it.

A firm may satisfy MCOB 5A.3.5 R by drawing the consumer's attention orally to the importance of reading and understanding the ESIS. For example, in a face-to-face meeting, or by referring to its importance in a covering letter or electronic communication, or other written information that accompanies the ESIS.

Form of an ESIS

Any ESIS provided to a consumer by a firm must be in a durable medium.

[Note: article 14(2) of the MCD]

Provision of information

When providing information on an MCD regulated mortgage contract, a firm should bear in mind that the information must be given in accordance with MCOB 2.5A.1 R (The customer's best interests).

MCOB 5A places no restrictions on the provision of information that is not specific to the amount the consumer wants to borrow. For example, marketing literature, including generic mortgage repayment tables or graphs illustrating the benefits of making a regular overpayment on a flexible mortgage. However, such literature may constitute a financial promotion and be subject to MCOB 3A (Financial promotions and communications with customers).

Messages to be given with information on MCD regulated mortgage contracts

(1)
Whenever a firm provides a consumer with information specific to the amount that the consumer wants to borrow on a particular MCD regulated mortgage contract, following an assessment of the consumer's needs and circumstances to comply with MCOB 4.7A.2 R, it must give, clearly and prominently, the following information:
1. (a)
  the same information on the firm's product range as is required by MCOB 4.4A.1 R, MCOB 4.4A.2 R and MCOB 4.4A.4R (1) (which require firms to provide information about limitations on the range of products they offer); and
2. (b)
  that the consumer has the right to request an ESIS for any MCD regulated mortgage contract which the firm is able to offer the consumer.
(2)
A firm need not give the information in (1) if it has previously given that information in compliance with this rule within the last ten business days.

To demonstrate compliance with MCOB 5A.3.10R (1), a firm may wish to consider, for example, doing one or more of the following actions:

(1)
giving the messages to the consumer in a durable medium;
(2)
building the requirements into the firm's training of staff, as evidenced by its training and compliance manuals;
(3)
insert appropriate prompts into paper-based or automated sales systems;
(4)
having procedures to monitor compliance by its staff with that rule.

What is required in each case will depend on all the circumstances.

Messages to be given when consumer requests an execution-only sale

(1)
Whenever, as part of an execution-only sale (or potential execution-only sale), a consumer provides a firm with the information in MCOB 4.8A.14R (1), MCOB 4.8A.14R (2) or (3), the firm must inform the consumer, clearly and prominently, that the consumer has the right to request an ESIS for any MCD regulated mortgage contract which the firm is able to offer the consumer.
(2)
A firm need not give the information in (1) if it has previously given that information in compliance with this rule within the last ten business days.

Record keeping

A firm must make an adequate record of each ESIS that it issues to a consumer under MCOB 5A.4.1 R where the consumer applies for that particular MCD regulated mortgage contract.

The record required by MCOB 5A.3.13 R must be retained for one year from the date of the application made by the consumer.

MCOB 5A.3.14 R does not require a firm to keep records of ESISs that are issued to a consumer when the consumer does not apply to enter into that particular MCD regulated mortgage contract.

The record maintained under MCOB 5A.3.13 R should contain or refer to matters such as:

(1)
the date on which the ESIS was provided to the consumer;
(2)
the date of the application made by the consumer; and
(3)
details of the medium through which the ESIS was provided.