Application and purpose

Part

MCOB Mortgages: Conduct of Business

Chapter

Application and purpose

Printed on: 15/11/2024

Rulebook at: 01/12/2004

MCOB 1

Application and purpose

MCOB 1.1

Application and purpose

01/12/2004

Application

MCOB 1.1.1

MCOB applies as described in this chapter.

31/10/2004

Purpose

MCOB 1.1.2

The purpose of this chapter is to set out to whom, for what activities, and within what territorial limits the rules, evidential provisions and guidance in MCOB apply. This chapter also provides guidance on the application of other parts of the Handbook to a firm that carries on regulated mortgage activities.

31/10/2004

MCOB 1.2

General application: who? what?

01/12/2004

MCOB 1.2.1

MCOB applies to every firm that:

(1) carries on regulated mortgage activities (subject to MCOB 1.2.3 R); or
(2) communicates or approves a qualifying credit promotion.

31/10/2004

Firm types and the regulated mortgage activities

MCOB 1.2.2

The application of most of MCOB is expressed by reference to four types of firm: mortgage lenders, mortgage administrators, mortgage arrangers and mortgage advisers. This includes those firms that provide business loans to customers under a regulated mortgage contracts (see MCOB 1.2.3 R to MCOB 1.2.9 G). A single firm may fall into more than one of these types. Guidance on these firm types, the regulated mortgage activities which they carry on, a description of what those activities cover and what is excluded is set out in MCOB 1 Annex 1. PERG 4 contains detailed guidance on those activities. AUTH App 4

31/10/2004

Business loans: application of MCOB

MCOB 1.2.3

In relation to a regulated mortgage contract for a business purpose

(1) MCOB applies if the customer is not a large business customer; and
(2) if MCOB applies, a firm must either:

(a) comply with MCOB in full (disregarding the tailored provisions for regulated mortgage contracts for a business purpose in the remainder of MCOB); or
(b) comply with MCOB taking account of those tailored provisions, including MCOB 1.2.7 R.

31/10/2004

MCOB 1.2.4

MCOB 1 Annex 2 contains a table summarising the provisions of MCOB that apply to regulated mortgage contracts that are for a business purpose. For detail of the tailored provisions applying, see the section on 'business loans' set out in each relevant chapter.

31/10/2004

MCOB 1.2.5

(1) In order for a loan to fall within the definition of a regulated mortgage contract, at least 40% of the total of the land to be given as security must be used as or in connection with a dwelling. Therefore, the variation in approach provided for in MCOB 1.2.3 R(2) can only apply where the loan being used for a business purpose is secured against a property at least 40 per cent of which is used as a dwelling. It cannot apply to a loan secured on property that is used solely for a business purpose.
(2) Whether a regulated mortgage contract is for a business purpose will be a matter of fact to be determined by a firm depending on the individual circumstances of each case. In the FSA's opinion, a regulated mortgage contract secured, for example, on the borrower's own home, but used to finance the purchase of a single buy-to-let property will not be for a business purpose.

31/10/2004

MCOB 1.2.6

In determining whether a customer is a large business customer for the purposes of MCOB 1.2.3 R(1), a firm will need to have regard to the figure given for the customer's annual turnover in the customer's annual report and accounts or business plan. In addition, a firm may rely on information provided by the customer about the annual turnover, unless, taking a common-sense view of this information, it has reason to doubt it.

31/10/2004

Business loans: additional requirements if tailored route is used

MCOB 1.2.7

In relation to a regulated mortgage contract for a business purpose, if a firm has opted for the tailored route in MCOB 1.2.3 R(2), it must adopt the following modifications to the provisions in MCOB:

(1) (except in relation to sections 6 and 8 of any initial disclosure document provided in accordance with MCOB 4.4.1 R(1)(c)(i) or sections 5 and 8 of any initial disclosure document provided in accordance with MCOB 4.4.1 R(1)(c)(ii)) substitute an alternative description of the facility provided under the regulated mortgage contract for 'mortgage' where that term is used in any disclosure;
(2) substitute the term 'illustration' for 'key facts illustration' when opting to use the tailored business loans rules in MCOB 4.9, MCOB 5.7, MCOB 6.7 or MCOB 7.7; and
(3) limit disclosure to facilities provided under the regulated mortgage contract.

31/10/2004

MCOB 1.2.8

(1) Firms are reminded of the requirement in MCOB 2.2.6 R that any communication should be clear, fair and not misleading when substituting an alternative for the term 'mortgage' in accordance with MCOB 1.2.7 R(1).
(2) Possible alternatives to the term 'mortgage' include, for example, 'secured business overdraft', 'secured loan' or 'secured business credit'.

31/10/2004

MCOB 1.2.9

The disclosure rules in MCOB place particular emphasis on the description of borrowing. Where the regulated mortgage contract is for a business purpose, a firm should reflect this emphasis in any disclosure by first describing any borrowing before addressing the other facilities provided under the regulated mortgage contract.

31/10/2004

Authorised professional firms

MCOB 1.2.10

MCOB does not apply to an authorised professional firm with respect to its non-mainstream regulated activities except for:

(1) MCOB 2.2 (Communications);
(2) MCOB 3 (Financial promotion); and
(3) MCOB 4.4 (Initial disclosure requirements) but only as regards providing the information contained in section 7 (What to do if you have a complaint) and section 8 (Are we covered by the Financial Services Compensation Scheme?) of MCOB 4 Annex 1 or MCOB 4 Annex 2, and MCOB 8 Annex 1 or MCOB 8 Annex 2

31/10/2004

MCOB 1.2.11

Authorised professional firms should be aware of the following:

(1) PROF 5 (Non-mainstream regulated activities); and
(2) MCOB 3.1.9 R (Authorised professional firms) and the exception in article 55 of the Financial Promotion Order (Communications by members of the professions) which applies in relation to qualifying credit promotions of authorised professional firms under MCOB 3.2.5 R(3) (Exemptions).

31/10/2004

Pre-contractual arrangements by a mortgage lender

MCOB 1.2.12

In MCOB the activities of a mortgage lender which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts to which the arranger is a party), are to be treated as arranging and therefore also as regulated mortgage activities.

31/10/2004

MCOB 1.2.13

The effect of article 28A of the Regulated Activities Order would normally mean that arrangements made by a party to a regulated mortgage contract would not fall within the regulated mortgage activity of arranging. So in a direct sale, a mortgage lender would not be carrying on the regulated activity of arranging but, where the transaction proceeds to completion, would instead be involved in the regulated activity of entering into a regulated mortgage contract. However, the provisions in MCOB on arranging regulated mortgage contracts are applied to pre-contractual arrangements by a mortgage lender.

31/10/2004

Summary of the application of the chapters of MCOB

MCOB 1.2.14

A table summarising the application of the various chapters of MCOB to firms that carry on regulated mortgage activities is set out in MCOB 1 Annex 3. For the detailed application of each chapter, see the application rule at the start of that chapter.

31/10/2004

MCOB 1.3

General application: where?

01/12/2004

Location of the customer

MCOB 1.3.1

Except as set out in this section, MCOB applies if the customer of a firm carrying on regulated mortgage activities is resident in:

(1) the United Kingdom; or
(2) another EEA State, but in this case only if the activity is carried on from an establishment maintained by the firm (or its appointed representative) in the United Kingdom;

at the time that the regulated mortgage activity is carried on.

31/10/2004

Financial Promotion

MCOB 1.3.2

The territorial scope of MCOB 3 (Financial promotion) is set out in MCOB 3.3 (Application: where?) rather than in this section.

31/10/2004

Electronic commerce activities and communications

MCOB 1.3.3

The territorial scope of this sourcebook is modified by ECO in relation to electronic commerce activities and electronic commerce communications.

31/10/2004

Distance contracts entered into from an establishment in another EEA State

MCOB 1.3.4

(1) The rules in (2) do not apply to a firm with respect to an activity exclusively concerning a distance contract if the following conditions are satisfied:

(a) the firm carries on the activity from an establishment maintained by the firm in an EEA State other than the United Kingdom; and
(b) either the EEA State:

(i) has implemented the DMD; or
(ii) has obligations in its domestic law corresponding to those provided for by the DMD;

and, in either case, with the result that the obligations provided for by the DMD (or corresponding obligations) are applied by that State when the firm carries on that activity; and
(c) the firm is a national of an EEA State or a company or firm mentioned in article 48 of the Treaty.

(2) The rules which do not apply are:

(a) MCOB 4.4 (Initial disclosure requirements);
(b) MCOB 4.5 (Additional disclosure for distance mortgage mediation contracts with retail customers);
(c) MCOB 4.6 (Cancellation of distance mortgage mediation contracts);
(d) MCOB 5 (Pre-application disclosure);
(e) MCOB 6 (Disclosure at offer stage);
(f) MCOB 7.6.7 R to MCOB 7.6.17 R (Further advances);
(g) MCOB 8.3 (Application of rules in MCOB 4) to the extent that it applies MCOB 4.4 to MCOB 4.6;
(h) MCOB 8.4 (Initial disclosure requirements: home reversion schemes);
(i) MCOB 9.3 (Pre-application disclosure);
(j) MCOB 9.4 (Content of illustrations); and
(k) MCOB 9.5 (Disclosure at offer stage for lifetime mortgages).

31/10/2004

Distance contracts with retail customers

MCOB 1.3.5

Parts of MCOB relate to distance contracts (or distance mortgage mediation contracts) with retail customers. These expressions are derived from the Distance Marketing Directive, and the following paragraphs provide some guidance to firms on their meaning:

(1) Retail customer
The Distance Marketing Directive applies for distance contracts with 'any natural person who is acting for purposes which are outside his trade, business or profession', for which the term 'retail customer' has been adopted. Examples of individuals who would be regarded as retail customers include:

(a) personal representatives, including executors, unless they are acting in a professional capacity, for example a solicitor acting as executor; or
(b) private individuals acting in personal or other family circumstances, for example, a trustee of a family trust.

(2) Distance contract
To be a distance contract, a contract must be concluded under an 'organised distance sales or service-provision scheme' run by the contractual provider of the service who, for the purpose of the contract, makes exclusive use (directly or through an intermediary) of one or more means of distance communication up to and including the time at which the contract is concluded. So:

(a) the firm must have put in place facilities designed to enable a customer to deal with it exclusively at a distance, such as facilities for a customer to deal with it purely by post, telephone, fax or the Internet. If a firm normally operates face-to-face and has no facilities in place enabling a customer to deal with it customarily by distance means, the DMD will not apply. A one-off transaction effected exclusively by distance means to meet a particular contingency or emergency will not be a distance contract; and
(b) there must have been no simultaneous physical presence of the firm and the other party to the contract throughout the offer, negotiation and conclusion of the contract. So, for example, contracts offered, negotiated and concluded over the Internet, through a telemarketing operation, or by post will normally be distance contracts.

31/10/2004

Use of intermediaries

MCOB 1.3.6

The mere fact that an intermediary (acting for the supplier or for the retail customer) is involved, does not make the sale of a financial product or service a distance contract. There will not be a distance contract if there has been simultaneous physical presence of the intermediary and the retail customer at some stage in the offer, negotiation and conclusion of the contract.

31/10/2004

MCOB 1.4

Application of the Handbook in relation to mortgages

01/12/2004

MCOB 1.4.1

A table summarising the application of the Handbook to firms carrying on regulated mortgage activities is set out in MCOB 1 Annex 4. For the detailed application of each module, see the application provision at the start of the module, and each chapter or section.

31/10/2004

MCOB 1.5

Application to appointed representatives

01/12/2004

MCOB 1.5.1

(1) Although MCOB does not apply directly to a firm's appointed representatives, a firm will always be responsible for the acts and omissions of its appointed representatives in carrying on business for which the firm has accepted responsibility (section 39(3) of the Act). In determining whether a firm has complied with any provision of MCOB, anything done or omitted by a firm's appointed representative (when acting as such) will be treated as having been done or omitted by the firm (section 39(4) of the Act).
(2) Firms should refer to SUP 12 (Appointed representatives), which sets out requirements which apply to firms using appointed representatives.

31/10/2004

MCOB 1.6

Application in relation to the Consumer Credit Act 1974

01/12/2004

MCOB 1.6.1

MCOB applies to regulated mortgage contracts entered into on or after 31 October 2004. Variations made on or after that date to contracts entered into before that date are not subject to FSA regulation but may be subject to the Consumer Credit Act 1974. AUTH App 4.4.13 G contains guidance on the variation of contracts entered into before 31 October 2004.

31/10/2004

MCOB 1.6.2

Principle 2 requires a firm to conduct its business with due skill, care and diligence. The purpose of MCOB 1.6.3 R is to reinforce this. The FSA would expect firms to take appropriate steps to determine whether any mortgage it proposes to enter into is subject to FSA regulation.

31/10/2004

MCOB 1.6.3

Before a firm enters into a mortgage, it must take all reasonable steps to establish whether that mortgage will be a regulated mortgage contract and therefore subject to MCOB.

31/10/2004

MCOB 1.6.4

If, notwithstanding the steps taken by a firm to comply with MCOB 1.6.3 R, it transpires that a mortgage which the firm has treated as unregulated is in fact a regulated mortgage contract, the firm must as soon as practicable after the correct status of the mortgage has been established:

(1) contact the customer and provide him with the following information in a durable medium:

(a) a statement that the mortgage contract is a regulated mortgage contract subject to FSA regulation, stating in particular the position with regard to redress and compensation; and
(b) (where relevant) a statement that the Consumer Credit Act 1974 will not apply to the mortgage contract and that any Consumer Credit Act rights or requirements set out in previous communications will not apply;

(2) apply to the regulated mortgage contract all relevant MCOB requirements, such as those on disclosure (in MCOB 7) or on the treatment of customers in arrears (in MCOB 13).

31/10/2004

MCOB 1.6.5

(1) MCOB 1.6.4 R(2) means, for example, that if a firm discovered immediately after completion that a loan was a regulated mortgage contract, the firm would be required to comply with MCOB 7.4 (Disclosure at the start of the contract).
(2) Although MCOB 1.6.4 R recognises that firms may become aware that a mortgage is a regulated mortgage contract at a late stage, the FSA expects this to be an extremely rare occurrence. It could arise, for example, if a firm has acted on the understanding, verified as far as was practicable, that in respect of a particular mortgage contract less than 40% of the land would be used in connection with a dwelling. If it was discovered later that more than 40% of the land was used in connection with the dwelling (and provided that all the other legal requirements were met) the mortgage will be a regulated mortgage contract to which MCOB applies.
(3) MCOB 1.6.3 R and MCOB 1.6.4 R do not override the application of MCOB to any regulated mortgage contract. MCOB applies notwithstanding a firm's genuine belief that a mortgage is unregulated. In deciding whether to take disciplinary action as a result of a breach of MCOB, the FSA will take into account whether the action by the firm was reckless or deliberate (see ENF 11.4.1 G(1)(a)).

31/10/2004

MCOB 1 Annex 1

Summary of firm types and of the regulated mortgage activities

01/12/2004

This annex belongs to MCOB 1.2.2 G and summarises the four firm types which are used in MCOB, the regulated mortgage activities which they carry on, what those activities cover and what is excluded. (See AUTH App 4 for detailed guidance on regulated mortgage activities). References to articles are to articles of the Regulated Activities Order.

The exclusions listed in this table are only a summary of the exclusions in the Regulated Activities Order. This summary is not a complete explanation of the exclusions and should not be relied on as if it were.

Type of firm

Regulated activity

Description of activity

Summary of exclusions

mortgage lender

entering into a regulated mortgage contract as lender (article 61(1) (Regulated mortgage contracts))

the provision of credit (which includes a cash loan or any other form of financial accommodation) to an individual or trustee under a regulated mortgage contract

unless: (1) the person providing credit is acting in the capacity of trustee or personal representative (article 66). See AUTH App 4.10.5G - 4.10.8G; or
(2) both the lender and borrower are overseas (AUTH App 4.11 (Link between activities and the United Kingdom)).

mortgage administrator

administering a regulated mortgage contract where that contract is entered into on or after 31 October 2004 (article 61(2) (Regulated mortgage contracts))

(1) notifying the borrower of changes in interest rates or payments due under the contract, or of other matters of which the contract requires him to be notified; or
(2) taking any necessary steps for the purposes of collecting or receiving payments due under the contract from the borrower.

unless: (1) the person arranges for a mortgage administrator to administer the contract (article 62); or
(2) the person administers the contract for a period of not more than one month after the arrangement in (1) has come to an end (article 62); or
(3) the person administers the contract under an agreement with a mortgage administrator (article 63); or
(4) the person administering the contract is acting in the capacity of trustee or personal representative (article 66). See AUTH App 4.10.5 G - AUTH App 4.10.8 G; or
(5) both the administrator and borrower are overseas ( AUTH App 4.11 (Link between activities and the United Kingdom)).

mortgage adviser

advising on regulated mortgage contracts (article 53A (Advising on regulated mortgage contracts))

giving advice to a person in his capacity as borrower or potential borrower on the merits of doing any of the following:
(1) entering into a particular regulated mortgage contract; or
(2) varying the terms of a regulated mortgage contract entered into on or after 31 October 2004 in such a way as to vary the borrower's obligations under the contract (see AUTH App 4.6 (Advising on regulated mortgage contracts)).

unless:
(1) the advice is given in a periodical publication, regularly updated news and information service or broadcast (article 54); see AUTH 7 (Periodical publications, news services and broadcasts: applications for certification); or
(2) the advice is given in the course of administration of the contract by an authorised person (article 54A); or
(3) the advice is given by a person carrying on a profession or business (other than a regulated activity) (article 67). See AUTH App 4.10 (Exclusions applying to more than one regulated activity); or
(4) the person giving the advice is acting in the capacity of trustee or personal representative (article 66). See AUTH App 4.10.5G - 4.10.8G.

mortgage arranger

(1) making arrangements for another person to
(a) enter into a regulated mortgage contract as borrower; or
(b) vary the terms of a regulated mortgage contract entered into by him as borrower after 31 October 2004 in such a way as to vary his obligations under the contract (article 25A(1)).

(1) making arrangements which bring about, or would bring about:
(a) the entering into of a regulated mortgage contract; or
(b) the variation of the terms of a regulated mortgage contract entered into after 31 October 2004, for example brokers making arrangements on behalf of a borrower which go beyond merely introducing. See AUTH App 4.5.2G.

unless:
(1) the person making the arrangements is to be a party to the regulated mortgage contract (article 28A) (but a mortgage lender is treated as a mortgage arranger for the purposes of MCOB: see MCOB 1.2.12R); or
(2) the arrangements do not bring about or would not bring about the regulated mortgage contract in question (article 26); or
(3) the arrangements are made between a borrower and an authorised person by an unauthorised person if specified conditions as to advice and remuneration are satisfied (article 29) (see AUTH App 4.5.8G); or
(4) the arrangements are made in the course of administration by an authorised person (article 29A); or
(5) the arrangements are made by a person in the course of carrying on a profession or business (other than a regulated activity) (see AUTH App 4.10) (Exclusions applying to more than one regulated activity); or
(6) where the arranger and borrower are overseas (AUTH App 4.11 (Link between activities and the United Kingdom)).

(2) making arrangements with a view to a person who participates in the arrangements entering into a regulated mortgage contract as borrower (article 25A(2)).

(2) making arrangements with a view to a person participating in those arrangements entering into a regulated mortgage contract (for example introducing potential borrowers to brokers or lenders). See AUTH App 4.5.3G.

(2) - (6) also apply and, in addition:
(1) arrangements under which a borrower is introduced to a mortgage arranger, a mortgage adviser or mortgage lender (which will include overseas firms) or an appointed representative who is appointed to arrange or advise on a regulated mortgage contract (article 33A). (See AUTH App 4.5.10G - 4.5.18G); or
(2) where the arrangements simply enable the parties to communicate with one another (for example internet service providers or telecommunication networks) (article 27).

31/10/2004

MCOB 1 Annex 2

Summary of the tailored provisions in MCOB that apply to regulated mortgage contracts that are for a business purpose and are not with large business customers

01/12/2004

This annex belongs to MCOB 1.2.4G

Chapter

Tailored provisions of MCOB that apply to regulated mortgage contracts that are for a business purpose

MCOB 1 (Application and purpose)

MCOB 1.2.3R to MCOB 1.2.9G (Business loans: application of MCOB)

MCOB 2 (Conduct of business standards: general)

None

MCOB 3 (Financial promotion)

None

MCOB 4 (Advising and selling standards)

MCOB 4.9 (Business loans)

MCOB 5 (Pre-application disclosure)

MCOB 5.7 (Business loans)

MCOB 6 (Disclosure at the offer stage)

MCOB 6.7 (Business loans)

MCOB 7 (Disclosure at start of contract and after sale)

MCOB 7.7 (Business loans)

MCOB 8 (Lifetime mortgages: advising and selling standards)

None

MCOB 9 (Lifetime mortgages: product disclosure)

None

MCOB 10 (Annual percentage rate)

None

MCOB 11 (Responsible lending)

None

MCOB 12 (Charges)

MCOB 12.6 (Business loans)

MCOB 13 (Arrears and repossessions)

MCOB 13.7 (Business loans)

31/10/2004

MCOB 1 Annex 3

Summary of the application of the chapters of MCOB

01/12/2004

This annex belongs to MCOB 1.2.8 G and summarises the application of the various chapters of MCOB to firms that carry on regulated mortgage activities and firms that communicate or approve qualifying credit promotions. For the detailed application of each chapter, see the application rule at the start of that chapter.

Chapter

Who does the chapter apply to?

MCOB 2 (Conduct of business standards: general)

(1) The whole chapter applies to a mortgage lender; a mortgage administrator; a mortgage adviser and a mortgage arranger when it carries on a regulated mortgage activity;
(2) MCOB 2.5, MCOB 2.6, MCOB 2.7, and MCOB 2.8 apply to a firm that communicates or approves a qualifying credit promotion.

MCOB 3 (Financial promotion)

The whole chapter applies to a firm when it communicates or approves a qualifying credit promotion.

MCOB 4 (Advising and selling standards)

The whole chapter applies to a mortgage adviser; the whole chapter except for MCOB 4.6 and MCOB 4.7 applies to a mortgage lender and the whole chapter except for MCOB 4.7 applies to a mortgage arranger.
The application of MCOB 4 for a regulated lifetime mortgage contract is replaced by MCOB 8 (Lifetime mortgages: advising and selling standards).

MCOB 5 (Pre-application disclosure)

The whole chapter applies to a mortgage lender; mortgage administrator; mortgage adviser and mortgage arranger when it:
(1) makes a personal recommendation about a particular regulated mortgage contract to a customer; or
(2) provides information to a customer that is specific to the amount that the customer wants to borrow on a particular regulated mortgage contract, including information provided in response to a request from a customer; or
(3) provides the means for a customer to make an application to it;
in connection with entering into or varying a regulated mortgage contract provided by a mortgage lender.
The application of MCOB 5 for a regulated lifetime mortgage contract is replaced by MCOB 9 (Lifetime mortgages: product disclosure).
The application of MCOB 5 for the variation of a regulated mortgage contract is replaced by MCOB 7 (Disclosure at start of contract and after sale).

MCOB 6 (Disclosure at the offer stage)

The whole chapter applies to a mortgage lender when it makes an offer to a customer with a view to entering into a regulated mortgage contract or to varying an existing regulated mortgage contract by adding or removing a party, making a further advance or switching all or part of the regulated mortgage contract from one type of interest rate to another.
In relation to regulated lifetime mortgage contracts, MCOB 6 is replaced by MCOB 9 (Lifetime mortgages: product disclosure).

MCOB 7 (Disclosure at start of contract and after sale)

(1) The whole chapter applies to a mortgage lender;
(2) MCOB 7.1- MCOB 7.3.3 and MCOB 7.5 - MCOB 7.7.4G apply to a mortgage administrator;
(3) MCOB 7.1 - MCOB 7.3.3R and MCOB 7.6.7R - MCOB 7.7.4G apply to a mortgage adviser; and
(4) MCOB 7.1 - MCOB 7.3.3R and MCOB 7.6.7R - MCOB 7.7.4G apply to a mortgage arranger;
In relation to regulated lifetime mortgage contracts, MCOB 7 is replaced by MCOB 9 (Lifetime mortgages: product disclosure).

MCOB 8 (Lifetime mortgages: advising and selling standards)

The whole chapter except for MCOB 8.5 applies to a mortgage lender.
The whole chapter applies to a mortgage adviser.
The whole chapter except for MCOB 8.5 applies to a mortgage arranger.

MCOB 9 (Lifetime mortgages: product disclosure)

MCOB 9.1-9.7 apply to a mortgage lender.
MCOB 9.1-9.4 and MCOB 9.8 apply to a mortgage administrator.
MCOB 9.1-9.4 apply to a mortgage adviser.
MCOB 9.1-9.4 apply to a mortgage arranger.

MCOB 10 (Annual percentage rate)

The whole chapter applies to a firm which, under rules elsewhere in MCOB, is required to calculate an annual percentage rate of charge (APR)).

MCOB 11 (Responsible lending)

The whole chapter applies to a mortgage lender when it enters into or makes a further advance on a regulated mortgage contract with a customer.

MCOB 12 (Charges)

(1) The whole chapter applies to a making arrangements with a view to deals in investments when it carries on a regulated mortgage activity;
(2) MCOB 12.1, MCOB 12.2 and MCOB 12.5.2R apply to a mortgage adviser and a mortgage arranger;
(3) MCOB 12.1, MCOB 12.2, MCOB 12.4 and MCOB 12.5.2R apply to a mortgage administrator and a firm that was a mortgage lender or mortgage administrator before the sale of a repossessed property.

MCOB 13 (Arrears and repossessions)

(1) The whole chapter applies to a mortgage administrator and a firm that was the mortgage administrator before the sale of a repossessed property.
(2) MCOB 13.1-13.3 (except MCOB 13.3.9R and MCOB 13.3.10G) apply to a mortgage lender and a firm that was the mortgage lender before the sale of a repossessed property.

31/10/2004

MCOB 1 Annex 4

Summary of the application of the Handbook to firms carrying on regulated mortgage activities and firms that communicate or approve qualifying credit promotions

01/12/2004

Table: This table belongs to MCOB 1.4.1G

Module

Application

High Level Standards

General provisions, GEN [*]

Applies (at least in part) to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender; and also to every firm which communicates or approves qualifying credit promotions.

Principles for Businesses, PRIN

Threshold Conditions, COND

Statements of Principle and Code of Practice for Approved Persons, APER

Applies to every approved person who performs a controlled function under an arrangement entered into by a mortgage administrator, mortgage adviser, mortgage arranger or mortgage lender; or by a firm which communicates or approves qualifying credit promotions.

The Fit and Proper test for Approved Persons, FIT

Applies to every firm including mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender in respect of any application that it makes for the approval of a person to perform a controlled function.

Senior management arrangements, Systems and Controls, SYSC

Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender and also to firms which communicate or approve qualifying credit promotions.

Business Standards

Interim Prudential Sourcebooks,

IPRU (BANK)

• Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender where they are also banks;

IPRU (BSOC)

• Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender where they are also building societies;

IPRU (FSOC)

• Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender where they are also friendly societies;

IPRU (INS)

• Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender where they are also insurers;

IPRU (INV)

• Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender where they are also investment firms;

PRU 9.2 (Professional indemnity insurance requirements for insurance and mortgage mediation activities)

• Applies to every mortgage adviser and mortgage arranger.

PRU 9.3 (Capital resources for insurance mediation activity, mortgage mediation activity, mortgage lending and mortgage administration)

• Applies to every mortgage adviser, mortgage administrator, mortgage arranger and mortgage lender.

PRU 9.4 (Insurance undertakings and mortgage lenders using insurance or mortgage mediation services)

• Applies to every mortgage lender which uses, or proposes to use, the services of another person consisting of insurance mediation, or insurance mediation activity or mortgage mediation activity.

Market conduct, MAR

Does not apply to a mortgage administrator, mortgage adviser, mortgage arranger or mortgage lender when entering into or administering regulated mortgage contracts, or when communicating or approving qualifying credit promotions. However, certain chapters of MAR apply to any such firm if:
(a) it also engages in behaviour in relation to qualifying investments traded on prescribed markets then MAR 1 applies;
(b) it undertakes or is concerned with offers of securities that may involve price stabilising activity then MAR 2 applies;
(c) it carries on inter-professional business - then MAR 3 applies;
(d) it carries on designated investment business - then MAR 4 applies.

Conduct of Business sourcebook, COB [*]

Does not apply to a firm when entering into or administering a regulated mortgage contract, or when communicating or approving qualifying credit promotions. However, COB may apply to any such firm if it also carries on any other regulated activity and/or communicates or approves financial promotions not relating to qualifying credit. The requirements of COB 3 COB 3 (Financial Promotion) do not apply to qualifying credit promotions.

Training and Competence sourcebook, TC [*]

TC 1 applies when a firm advises on, arranges, enters into or administers regulated mortgage contract or when it communicates or approves qualifying credit promotions. TC 2 applies only in circumstances where a firm has employees engaging in or overseeing other activities as listed in TC 2.1.4 R.

Money Laundering sourcebook, ML [*]

Applies to every mortgage administrator and mortgage lender. This includes in circumstances where the mortgage administrator is appointed by a person who is not an authorised person to administer regulated mortgage contract on its behalf.

Regulatory processes

Client asset sourcebook, CASS

Does not apply to mortgage firms.

Authorisation manual, AUTH [*]

Applies to:
(1) a person, other than an authorised person, considering carrying on the regulated activities of mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender in the United Kingdom, and who require guidance on whether authorisation is required and, if so, how to apply to the FSA for Part IV permission;
(2) an EEA firm or a Treaty firm that wishes to establish a branch or provide cross border services into the United Kingdom in relation to mortgage lending or wishes to apply for a top-up permission that includes mortgage lending;
(3) a person wishing to obtain approval for persons performing controlled functions in relation to mortgage lending and in conjunction with an application for Part IV permission; and
(4) a person wishing to understand how the FSA will use its powers in relation to authorisation to determine applications.

Supervision manual, SUP [*]

The following chapters of SUP apply to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender, and also to firms which communicate or approve qualifying credit promotions: 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 15, 16, 20.
The following chapters of SUP do not apply to a mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender; or to a firm which communicates or approves qualifying credit promotions unless it carries on other activities: 4, 12, 13, 14, 17, 18, 19

Enforcement manual, ENF [*]

Potentially relevant for every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender and firms which communicate or approve qualifying credit promotions and gives guidance on the use of FSA's enforcement powers.

Decision making manual, DEC

Redress

Dispute Resolution: Complaints, DISP [*]

Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender; and also to firms which communicate or approve qualifying credit promotions.

Compensation, COMP [*]

The regulated mortgage activities which are covered by the compensation scheme are:
(1) advising on; or
(2) arranging regulated mortgage contracts; or
(3) agreeing to carry on the regulated activities in (1) to (2); or
(4) the activities of a mortgage lender which would be arranging but for article 28A of the Regulated Activities Order (Arranging contracts to which the arranger is a party).

Specialist sourcebooks

Credit unions, CRED

Applies to every mortgage administrator, mortgage lender, and to firms that communicate or approve qualifying credit promotions where they are credit unions and have a Part IV permission to accept deposits.

Electronic Commerce Directive, ECO [*]

Applies to a firm which carries on an electronic commerce activity.

Electronic money, ELM [*]

Applies to every firm that issues E-money.

Professional firms, PROF [*]

Applies to every mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender and to firms that communicate or approve qualifying credit promotions where they are professional firms.

Lloyd's sourcebook. LLD

Applies only to the Society but some requirements are relevant to mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender and to firms that communicate or approve qualifying credit promotions where they are also underwriting agents.

Collective Investment Scheme sourcebook, CIS

Recognised Investment Exchanges and Recognised Clearing Houses, REC

Does not apply to mortgage administrator, mortgage adviser, mortgage arranger and mortgage lender, or to firms that communicate or approve qualifying credit promotions.

31/10/2004