Topic 21 (Conduct of business requirements II)

Question 1

What does the MCOB sourcebook cover?

Answer 1

Lending, Administration, Advice and Loans

Question 2

What is a FIRST charge mortgage?

Answer 2

If a lender has to take possession of a property and sell it as a result of the borrower defaulting on the loan, the holder of a first-charge loan has the right to be repaid ahead of other charge holders from the proceeds of the sale

Question 3

What is a SECOND charge mortgage?

Answer 3

In the event of the property being repossessed and sold as a result of default by the borrower, the holder ranks behind first-charge lenders for repayment; they will only have a claim on the proceeds of the sale once the first charge has been repaid in full

Question 4

What is consumer buy to let?

Answer 4

A mortgage defined as one that has not been entered into wholly or predominantly for the purpose of a business carried out by the borrower

Question 5

MCOB rules specify that only 2 levels of service can be provided, what are they?

Answer 5

1. Advice

2. Execution only

Question 6

What are examples of vulnerable customers?

Answer 6

1. those buying a property using the statutory right to buy
2. those entering a sale and rent back agreement
3. Equity-release applicants

Question 7

Determining the suitability of a mortgage involves 3 stages, what are they?

Answer 7

1. Asses whether a mortgage is, in itself a suitable product for the client
2. Asses what type of mortgage is suitable
3. Select bets mortgage and mortgage provider to meet clients needs

Question 8

What is a stress test?

Answer 8

Involves checking that an applicant will be able to afford the payments if interest rates rise

Question 9

What is committed expenditure?

Answer 9

Repayments on credit agreements or other contractual arrangements

Question 10

What is basic Essential expenditure?

Answer 10

Expenditure on food and other housekeeping costs

Question 11

What do Payment service regulations (PSRs) apply to?

Answer 11

• banks
• building societies
• E-money issuers
• money remitters
• non-bank credit card issuers
• non-bank merchant acquires

Question 12

What is a money remitter?

Answer 12

A payment services provider that accepts funds for payment without necessarily holding on account with either the payee or payer.

Question 13

What are non-bank merchant acquires?

Answer 13

A financial institution other than a bank that processes credit or debit card payments

Question 14

What is the Payment services Directive (PSD2)?

Answer 14

Is a significant evolution of existing regulation for the payments industry and aims to increase competition in the payments industry

Question 15

What is the role of the Payment systems regulator (PSR)

Answer 15

To oversee all domestic payment systems that are b brought into the regulators scope by HM treasury

Question 16

What does the lending standards board do?

Answer 16

publishes standards to which firms that are registered with the LSB must adhere

Question 17

The standards of lending practice set out principles covering 6 main areas, what are they?

Answer 17

1. Financial promotions and communications
2. Product sale
3. Account management and servicing
4. Money management
5. Financial difficulty
6. Customer vulnerability

Question 18

What are the products covered by the standards of lending practice?

Answer 18

• unsecured loans
• credit/charge cards
• current account overdrafts

Question 19

What are the 5 categories of advice?

Answer 19

1. Basic advice
2. Generic advice
3. Focused advice
4. Simplified advice
5. Robo advice