Topic 8 Regulation & The Buying Process Flashcards
What are these in relation to the buying process?
- Financial promotions (marketing of mortgages) MCOB 3A
- Initial Disclosure (meeting the advisor, discuss custom needs to identify a suitable mortgage) MCOB 4 & 4A
- Providing advice MCOB 4 & Lending responsibility MCOB 11 & 11A
Key regulatory stages
What are these in relation to the buying process?
- Making an application MCOB 5 & 5A
- Receiving a mortgage offer from lender MCOB 6 & 6A
- Disclosure at the start of the contract MCOB 7
Key regulatory stages
What is a “financial promotion”?
An invitation or inducement to engage in investment activities (including mortgages)
According to MCOB financial promotions can be both solicited & unsolicited?
True or False
True
What does an individual or a firm need to be to engage in financial promotions?
Authorised by the FCA
Or
Approved by an authorised person or firm by the FCA
What is a “Non-real time financial promotion”?
Promotion that does not include interactive dialogue
e.g. SMS, Email, Faxes, Letters, adverts
These are what in relation to “Non-real time financial promotions”?
- Company details
- Clarity
- Risk of repossession
- Annual percentage rate of charge (APRC)
- Interest rate
What Non-real time promotions must conform to
These are what in relation to “Non-real time financial promotions”?
- Credit
- Term
- Instalments
- Total
- Example (Representative)
What Non-real time promotions must conform to
When a firm is conducting “Non-real time promotions”. Clarity contrasts of comparisons must be presented in what way?
Fair & Balanced
When a firm is conducting “Non-real time promotions”. Annual percentage rate of charge (APRC) must be included if the promotion contains price information?
True or False
True
When a firm is conducting “Non-real time promotions”. What is a representative example mean?
Where at least 51% of respondents to a financial promotion would be charged the APRC quoted on the example
What is the minimum time a firm should keep records of “Non-real time promotions”?
12 months
What is a “Real time financial promotion”?
Promotion done through internal dialogue
E.g. telephone, face to face conversation
Unsolicited calls (cold calls) are only allowed when?
When the person being called has an established existing customer relationship with the firm
These are what in relation to “Real time promotions”?
- Hours
- Contact
- Identification
- Check
- Terminate
- Content
Rules that firms must follow in relation to real time promotions
What would be considered as unsociable hours for a cold call?
- Sundays
- Between 9pm & 9am
What is “Initial Disclosure”?
Firm arranging a mortgage for a customer firm must provide information about firm & status
The “Relevent markets” in relation to initial disclosure are?
- Regulated mortgage (non-business)
- Those for business purposes
These are what In relation to “Initial Disclosure”?
- Limitations in the range of products offered
- Alternative finance options (increasing secured borrowing)
- How the firm will be remunerated
What “Initial Disclosure” must tell the customer
Which of the 3 types of service would this be?
Firm selects & recommends a range of products that represent the whole market
Unlimited
Which of the 3 types of service would this be?
Firm selects & recommends from a limited range of products. Typically from panel of lenders
Limited range
Which of the 3 types of service would this be?
Firm selects and recommends only the products of a single lender
Single lender
If a firm only offers products from one part of the market. Is it allowed to call it’s unlimited?
No
In relation to a firm’s renumeration what are the below?
- Any fees the firm will charge them
- When fees are payable (also reimbursable)
- Whether the firm will receive commission or procuration fee
- State the amount of commission they are to receive
Information a firm must inform a customer of
Where a customer is looking to raise funds on a property that already has a regulated mortgage what options would the firm inform the customer of?
- Further advance (on the property)
- Second charge
- Unsecured borrowing
Where a customer is considering a “Retirement Interest Only Mortgage” a firm must either in writing or orally let the customers know that a retirement interest only may be available and suitable. Is there a requirement for the firm to provide advice on the suitability of a lifetime mortgage?
No
A borrower seeking a regulated mortgage may be given what?
- Qualified advice
- Proceed on “Execution Only” basis
What are these in relation to advising on an MCD regulated mortgage?
- Information included in the ESIS
- Key characteristics of the product
- Effect the product would have on the customer (defaulting)
- Scope of service, fees payable & renumeration (if advice given by the firm)
Adequate explanation of the product a firm must give when recommending a product
How long is the minimum time a firm must keep customers information records used to make a recommendation?
3 years
What is a mortgage conducted on an “Execution Only” basis?
Transaction completed on a client’s specific instructions where no advise is given
What 3 types of customer are allowed to proceed with an “Execution Only” transaction
- High Net Worth (HNW) customers
- Professional customers
- Loan is for business purposes
These are what in relation to “Execution Only” transactions
- No interactive dialogue between the firm & customer during the sale
- Interactive dialogue but the firms contribution is limited
- Customers has rejected advice
Situations where “Execution Only” is allowed
How long must a firm keep details of an “Execution Only” deal?
3 years
When conducting business with a High Net Worth (HNW) customers what are these?
- Disclosure (can adopt a tailored approach)
- Advice (sale can be done on “Execution Only”)
- Responsible Lending (more flexibility when assessing affordability)
Different approaches a firm can use for High Net Worth (HNW) clients
When a High Net Worth (HNW) customer opts for “Execution Only” what does the firm require from them to proceed with the customers request?
Written Confirmation
Are the below types of scenarios eligible for “Execution Only”
- Purpose of the loan is for a “statutory right to buy” property
- To raise funds for debt consolidation
- Mortgage is for a “Shared equity arrangement”
No they are not eligible
What are the 3 requirements for a product to be deemed as suitable for a customer?
- Affordability
- Appropriate for customers needs
- Suitable from product range
If a firm is offering more than one product & advices the customer to take out the more expensive product what must it do?
Explain why they are recommending taking the more expensive product
When a firm or advisor is recommending a MCD regulated mortgage what must they do?
Provide the customer with a written copy of the recommendation
What must a firm or advisor do when there is no product suitable for the customer?
Not make a personal recommendation
How long should details of a recommendation for the suitability of a mortgage be kept?
At least 3 years
According to MCOB 11 (Responsibility Lending) what must a lender ensure?
That they have taken account that the borrower can repay the mortgage
The records that must be kept by a lender showing that they have demonstrated responsible lending must be kept for how long?
3 years
Which of these abbreviations is specific to mortgages?
APR or APRC
APRC
When a firm is informing a customer about it’s range of products. Is the below Mortgage Credit (MCD) or Non-MCD?
Inform the customers about number of lenders & right to request lists of lenders
Non-MCD
When a firm is informing a customer about it’s range of products. Is the below Mortgage Credit (MCD) or Non-MCD?
Must list all names of lenders whose products are offered
MCD
What is the reflection period for an MCD mortgage
7 days (minimum)
What is “Pre-application disclosure” (MCOB 5 & 5A) is what?
Information that must be provided to a customer before they complete an application for a regulated mortgage
A Mortgage Credit Directive (MCD) mortgage would prescribe information to a customer through a what?
European Standardised Information Sheet (ESIS)
The below information in relation to “Pre Application Disclosure” (MCOB 5 & 5A) is this a MCD or Non-MCD mortgage?
- Period a ESIS is valid
- Lender & contact details (recommendations if provided)
- Intermediary & contact details (recommendations if provided)
- Main features of the loan
MCD Mortgage
The below information in relation to “Pre Application Disclosure” (MCOB 5 & 5A) is this a MCD or Non-MCD mortgage?
- Interest rate & other costs (APRC if applicable)
- Frequency & number of payments
- Amount of each installment
- Illustration repayment table (breakdown of each payment)
MCD mortgage
The below information in relation to “Pre Application Disclosure” (MCOB 5 & 5A) is this a MCD or Non-MCD mortgage?
- Retirement Interest Only Mortgage information
- Complaints (including timescales)
- Non-compliance with comments
- Supervisor (FCA supervising authority)
MCD mortgage
If the terms of a proposed mortgage change materially between the provisional on the ESIS & the application being made. What must the firm do?
Provide a revised ESIS
If a recommendation for a MCD mortgage is done over the telephone within how many days must a ESIS be sent?
5 days
What is the name of the Non-MCD version of a ESIS?
Key Facts Illustration (KFI)
For a MCD mortgage when should a ESIS for be provided?
As soon as possible
What are these in relation to a KFI?
- No reflection period
- Not subject to MCD “Binding Offer”
- Show APR instead of APRC
Differences between a KFI and ESIS
How long should firms keep record of ESIS & KFI’s
1 year from the customers application
Cold calling is allowed for mortgages?
True or False
False
Rules at the offer stage for MCD mortgages are covered by which MCOB section?
MCOB 6A
The lender’s final offer for a MCD mortgage is this binding or not binding on the lender?
It is binding on the lender
The below are the content of the offer document for which type of mortgage?
Regulated or MCD
- Period the offer is valid
- When the interest rate will change
- Consequences of customer not proceeding (fees not being reimbursed)
MCD mortgage
The below are the content of the offer document for which type of mortgage?
Regulated or MCD
- No right of withdrawal once the mortgage is concluded
- Customer repayment strategy
- Information about retentions or reinspection
- Information about how to complain
MCD mortgage
The below are what in relation to an MCD mortgage’s offer document?
- Tariff of charges incurred on mortgage product
- Details of charges linked to current accounts etc linked to the mortgage
Information that must be provided as a part of the mortgage offer documents
If a mortgage contract includes a credit card the document must state what?
The credit card will not provide statutory rights associated with normal credit cards
For Non-MCD regulated mortgages where a customer is looking to vary the terms of an existing regulated mortgage. The below are covered by which rule in MCOB
- Adding or removing a party
- Making a further advance
- Switching some or all of the mortgage to a different interest rate option
MCOB 6
What must the offer document for a regulated mortgage contain?
State that:
“Customers is not bound by the offer document until the legal charge is signed and fund for the mortgage are released”
The lender’s offer for a Non-MCD mortgage is binding on the lender?
True or False
False
MCD & Non-MCD mortgage offer documents must be kept for how long after they have been issued?
1 year
The following is to be provided by the lender to the borrower. When is it due?
- Amounts & dates of mortgage payments
- Method the payment will be collected
- Premiums & collection arrangements for mortgage linked investments/ insurance purchased through the firm
- Confirmation of the type of mortgage
Before the first payment
The following is to be provided by the lender to the borrower. When is it due?
- If an interest only mortgage reminder that the repayment vehicle is in place
- What customer should do if the have repayment issues
- Confirmation of an linked borrowing/ Deposits
- Whether over or underpayments are allowed
Before the first repayment
These are what in relation to ERC’s
- When an ERC is payable
- Basis of the calculation
- Maximum ERC payment
What a lender must provide to a customer regarding ERC’s
When advising on a MCD Regulated mortgage a firm does not have to provide an adequate explanation of the product being recommended?
True or False
False they must do so either orally or in writing
Is a firm allowed to provide factual information if an application has been submitted on an “Interest Only basis”
Yes
