1. Regulatory Framework - Section B - MCOB Flashcards
Who do the MCOB rules apply to?
Mortgage lenders, advisers, arrangers and administrators
The 3 ways in which firms and individuals operate determines how the MCOB rules apply to them, what are they?
Direct authorisation by the FCA- The firm is responsible
Appointed representatives - Responsibility lies with the principal (the firm)
Introducer - The firm passes on leads to an authorised person who pays for them
What 3 things can the intermediary deal with?
The whole market
A limited number of lenders as an AR of them all
A single lender as an AR of them only
What 3 criteria apply in order for a mortgage to be considered a regulated mortgage contract?
The lender provides credit to the borrower
The obligation to repay is secured by a mortgage on land of which at least 40% is used or intended to be used
The mortgage is not a home purchase plan, limited second charge loan, buy to let etc.
Which 2 contracts are NOT regulated mortgage contracts?
A loan to a company
A loan for the purchase of commercial property
All mortgage sales must be advised, except on an execution only basis - when is this permitted? (3 answers)
A non interactive process (post/online)
The customer is a high net worth individual, a mortgage professional or the loan is solely for business purpose
The customer rejects advice given and wishes to proceed with a product of their own choice
What is an early repayment charge and which mortgages to they tend to apply to?
The charge applied for repaying a loan early either in full or in part. Tend to apply to fixed term mortgages.
What is the Higher lending charge?
A charge made when the Loan to Value exceeds a certain threshold, typically 75%
What is a lifetime mortgage?
For older customers typically aged 55 and above. The repayment is not sought until the customer dies or goes into long term care. (Previously known as equity release or roll up mortgages)
What is a home reversion plan?
Where an older homeowner sells part or all of their property to a finance provider and becomes a tenant either for life, until the property is sold or permanently vacated. This is only offered by a few specialist providers.
Which 4 methods of promotion do the MCOB rules apply to?
Advertisements, Telephone calls, Personal visits, Presentations to groups.
Which 2 methods of promotion do the MCOB rules NOT apply to?
Letters and illustrations to just one customer.
Simple promotions containing only the name and details of the firm.
What are real time credit promotions?
Personal visits, telephone conversations and other interactive dialogue.
What are non real time promotions?
Those not involving conversation or interactive dialogue such as websites, leaflets etc.
How long should records be kept for after the last communication with the customer?
1 year
When do advising and selling standards apply to lenders, advisers and arrangers? (2 answers)
When they make or expect to make a personal recommendation, or provide personalised information about entering into or varying a regulated mortgage contract.
What is pre application disclosure?
Key information given to the customer as soon as it becomes clear that they are considering entering into a mortgage.
On what grounds can a firm conclude that a contract is suitable for the customer? (3 Answers)
It must be affordable
Appropriate for their needs
The most suitable the firm has available.
What is considered ‘key information’ that must be communicated to the customer? (5 Answers)
Firm’s name contact details and reg number
The level of service to be provided
The advice that will be given
The role of the FCA as regulator
The firm’s membership of the Financial Ombudsman Service and the Financial Services Compensation Scheme (FSCS)
In relation to affordability, what 2 things must the firm explain to the customer?
That it is based on current interest rates which may increase and;
The customers current circumstances, which may change.
What 4 things must a firm take into account upon arriving at a recommendation for a customer?
Income and expenditure - and whether this is likely to change.
Any extra costs connected to the end of any discount period
The permanency of income
The customer’s committed expenditure.
If the purpose of the contract is to consolidate debt, what 3 things must also be taken into account?
Costs associated with increasing the repayment method
Whether it is appropriate to secure a previously unsecured debt
Whether the customer is known to have payment difficulties and it would be better for them to negotiate an agreement with creditors.
Before submitting the application, customers must be given a European Standardised Information Sheet (ESIS) which must contain what 3 things?
Key features of the contract
The price to be paid including fees
Any linked or tied products such as insurance
Once an application is accepted, what 2 documents must be sent to the customer on a durable medium?
An offer document
A suitably updated offer ESIS or mortgage illustration to compare with the original
