Small Mortgage and Insurance Intermediaries: Part II - Mortgage Intermediaries (additional rules) | Prudential Regulation Authority Handbook & Rulebook

Part

Small Mortgage and Insurance Intermediaries: Part II - Mortgage Intermediaries (additional rules)

Printed on: 05/11/2024

Rulebook at: 30/08/2006

Chapters

MOGI 1 Introduction to Part II
MOGI 2 Mortgages: Conduct of Business Sourcebook (MCOB)
MOGI 3 Training and Competence sourcebook
MOGI App Appendix A: brief description of terms in Part II
MOGI AppB Appendix B: Lifetime Mortgages: advising and selling - assessment of suitability

MOGI 1

Introduction to Part II

MOGI 1.1

Using this Guide

01/12/2004

MOGI 1.1.1

The Guide to the FSA Handbook for Small Mortgage and Insurance Intermediaries (the Guide) is in three parts:

(1) Part I covers all the parts of the Handbook that apply to mortgage and insurance intermediaries other than rules on conduct of business, training and competence and client money. Chapter 2 of Part I explains the structure of the Handbook, what parts apply to small insurance and mortgage intermediaries and how to interpret the provisions of the Handbook.

(2) Part II (this Part) covers the conduct of business and training and competence rules for mortgage intermediaries.

(3) Part III covers the client money, conduct of business and training and competence rules for insurance intermediaries.

01/12/2004

MOGI 1.1.2

From 31 October 2004, we (the FSA) will become responsible for regulating mortgage lenders and intermediaries. This Part of the Guide (together with Part I) will help the small mortgage intermediaries we authorise already or who have decided to seek authorisation, to find the rules in the FSA Handbook of rules and guidance (the Handbook) that apply to them. Part III will be relevant to mortgage intermediaries if they also do insurance mediation business.

01/12/2004

MOGI 1.1.3

The rules explained in this Part of the Guide are:

(1) Mortgages: Conduct of Business sourcebook (MCOB)) (see chapter 2); and

(2) Training and Competence sourcebook (TC) (see chapter 3).

01/12/2004

MOGI 1.1.4

Don't forget the Guide is only a tool to help you navigate and understand the Handbook and to find the rules that are relevant to your firm. It is not a substitute for the rules themselves and is not a comprehensive statement of your firm's obligations under our rules. You should use it to help guide you through the most relevant aspects of our regulatory regime.

01/12/2004

MOGI 1.1.5

This Guide is not formal guidance and does not have the status of guidance in the Handbook. You cannot use this Guide to counter a charge of breaking our rules. If there is any conflict between this Guide and the Handbook, the Handbook takes precedence.

01/12/2004

MOGI 1.1.6

This Guide is current as at 31 March 2004. This Guide does not remove the need for firms to keep up to date with regulatory developments and to consider the potential impact on their business of proposed changes. We will regularly update this Guide but we will not update it each time the handbook changes.

01/12/2004

Key terms

MOGI 1.1.7

This Guide uses terms consistent with those defined in the Handbook Glossary. These terms are in italics in the Handbook (though not in this Guide). To help you, Appendix A to Part I contains brief definitions of some of the terms that we use throughout the Guide. Appendix A to Part II explains the key terms used in this Part. In each case firms should consult the Handbook Glossary for the full definitions.

01/12/2004

What does MCOB cover?

MOGI 1.1.8

The rules in MCOB govern a firm's relationship with its consumers before, during and after the sale of a mortgage. They aim to ensure that firms treat consumers fairly.

01/12/2004

MOGI 1.1.9

The table in paragraph 1.1.13 summarises the content of each chapter of MCOB. Which chapters of MCOB apply to you will depend on the business you do. For example, the general standards and pre-sale rules in MCOB 2, MCOB 3, MCOB 4 and MCOB 5 will apply to you when selling mortgages day-to-day. MCOB 8 and MCOB 9 apply if you sell lifetime mortgages.

01/12/2004

MOGI 1.1.10

This Guide does not cover the rules on distance mortgage mediation contracts in MCOB 4 as we think these contracts rarely exist. You should check the guidance at MCOB 4.5.1 G to see if you provide distance mortgage mediation contracts.

01/12/2004

Which activities does MCOB apply to?

MOGI 1.1.11

MCOB applies to intermediaries that sell regulated mortgage contracts or that communicate or approve qualifying credit promotions. The terms "regulated mortgage contract" and "qualifying credit promotion" have a special meaning in the rules (see Appendix A). Guidance on the scope of our regime is in our Authorisation Manual (see AUTH App 4 available on our website). This will shortly be transferred to a new Perimeter Guide outside the Handbook (with the shortened title of PERG). Guidance on qualifying credit promotions is in our Authorisation Manual (see AUTH App 1.17.2 G, available on our website at www.fsahandbook.info/FSA/handbook.jsp?doc=/handbook/AUTH/App/1/17).

31/05/2005

How to tell whether the chapters of MCOB apply to you

MOGI 1.1.12

At the start of most chapters a table tells you which parts of the chapter apply to you. For example, the table in MCOB 7 explains that sections 7.4 to 7.6.6 do not apply to mortgage advisers and arrangers (the rest of MCOB 7 does apply to intermediaries). Annex 3 to MCOB 1 summarises which rules apply to which firm.

01/12/2004

MOGI 1.1.13

Summary of the content of MCOB:

Chapter

Title

Does it apply to you?

What does it include?

MCOB 1

Application and purpose

Yes

A summary of how the MCOB rules apply to firms.
Guidance on the other parts of the FSA Handbook.

MCOB 2

Conduct of business standards: general

Yes

General requirements that apply throughout MCOB.
Communications to consumers must be clear, fair and not misleading.
Rules on inducements.

MCOB 3

Financial promotions

Yes

Content requirements for qualifying credit promotions.
A ban on unsolicited real time promotions (cold calling) except in limited circumstances.
Rules on the approval of promotions.

MCOB 4

Advising and selling standards

Yes

The initial disclosure document.
The scope of service provided.
Suitability of advice.
Rules for non-advised sales.

MCOB 5

Pre-application disclosure

Yes

Timing and content of the key facts illustration (KFI).

MCOB 6

Disclosure at the offer stage

Content of the offer document.

MCOB 7

Disclosure at start of contract and after sale

Partially

Information requirements for post-sale contract variations (such as further advances).

MCOB 8

Lifetime mortgages - advising and selling standards

Only if you sell lifetime mortgages

A tailored regime for advising on and selling lifetime mortgages.

MCOB 9

Lifetime mortgages - product disclosure

Only if you sell lifetime mortgages

Tailored product disclosure requirements for lifetime mortgages.

MCOB 10

Annual percentage rate

Yes if you calculate APRs.

How to calculate the APR.

MCOB 11

Responsible lending

Lenders must check the consumer's ability to repay.

MCOB 12

Charges

Partially

Charges must not be excessive.

MCOB 13

Arrears and repossessions

Generally no, unless you do any debt collection activity.

Rules on treatment of borrowers in arrears and facing repossession.

31/05/2005

Example materials

MOGI 1.1.14

MCOB contains rules about what the following materials should look like:

(1) advertisements;

(2) initial disclosure documents (IDD); and

(3) key facts illustrations (KFI).

01/12/2004

MOGI 1.1.15

Annex 1 to MCOB 3 includes example adverts that comply with the rules. We provide blank templates in the relevant chapters that show what the IDD, the Combined Initial Disclosure Document (CIDD) and KFI should look like. There are also word templates of the IDD and CIDD on our website at www.fsa.gov.uk/pubs/policy/ps186/examples_disclosure.pdf. We have published example IDDs and KFIs on our website at www.fsa.gov.uk/pubs/policy/ps186/examples_disclosure.pdf .

31/05/2005

Business lending

MOGI 1.1.16

Some business lending will come under the MCOB rules where the loan meets the definition of a regulated mortgage and is to a sole trader or partnership (but not loans made to limited companies). Because business lending processes can be different, certain chapters allow firms to tailor the process and documentation.

01/12/2004

General requirements

MOGI 1.1.17

There are several general rules that apply in MCOB (set out in MCOB 2) covering:

(1) clear, fair and not misleading communication (MCOB 2.2);

(2) unfair inducements (MCOB 2.3);

(3) high pressure sales (MCOB 2.4);

(4) when you can rely on information provided to you by another person (MCOB 2.5);

(5) general requirements related to distance contracts (MCOB 2.7); and

(6) general requirements on record keeping (MCOB 2.8).

01/12/2004

Key facts logo

MOGI 1.1.18

The key facts logo is a logo that we have developed following consumer research to highlight key information that consumers should read. The MCOB rules say that it must be used on the IDD, the combined initial disclosure document (CIDD) and the KFI. You will find a specimen of the logo on our website at: www.fsa.gov.uk/Pages/Library/Other_publications/Logos_and_Photos/keyfacts_logo.shtml. We require the logo to be used on certain documents required by our rules in the insurance, investment and mortgage markets. Our rules also prevent firms using the key facts logo on other documents (MCOB 2.2.4 R and MCOB 3.6.9R(3)).

01/12/2004

Changes to disclosure requirements when your firm carries on regulated mortgage activities for another authorised firm or an AR.

MOGI 1.1.19

A waiver and modification by consent has been in force for firms - third party processors (TPPs) - who undertake regulated activities on behalf of another authorised firm. This waiver and modification affected MCOB 1.2.1 R, ICOB 1.2.1 R and GEN 4.3.1 R. This has now been replaced by permanent rule amendments, which came into force on 1 June 2005. See The Third Party Processors Instrument 2005 (2005/25)
The rule amendments allow a TPP (Firm A) undertaking regulated mortgage activities (or insurance mediation activities in relation to non-investment insurance contracts) on behalf of another authorised firm (Firm B) under an outsourcing contract, to disclose to customers that it is B where our rules would otherwise require A to disclose its real identity. The outsourcing agreement between the two firms must acknowledge that the firm outsourcing the activities (B) accepts responsibility for the activities carried on by the other firm (A) on its behalf. Changes have also been made to DISP and SUP as a result of the amendments made to MCOB and GEN.

31/05/2005

MOGI 1.1.20

The rules also cater for cases where an AR acts as TPP for its principal, or where an authorised firm acts as TPP for an AR. The amended rules also allow an authorised firm at the end of a 'chain' of outsourcing contracts (Firm C) to represent itself as the main firm (Firm B in the above example), providing Firm B accepts responsibility for the authorised firm (Firm C) when it carries on outsourced activities.

31/05/2005

MOGI 2

Mortgages: Conduct of Business Sourcebook (MCOB)

MOGI 2.1

Financial promotion (MCOB 3)

01/12/2004

Introduction

MOGI 2.1.1

Financial promotions include but are not limited to advertisements. They are invitations or inducements to engage in an investment activity (which includes mortgages). They can be solicited or unsolicited and can take various forms, such as mailshots and newspaper or TV advertisements. The financial promotion rules relating to mortgages (which we call 'qualifying credit promotions') are in Chapter 3 of MCOB (MCOB 3).

01/12/2004

What is the scope of the financial promotion rules?

MOGI 2.1.2

Financial promotions are prohibited unless they are communicated by an authorised person or an authorised person has approved the content of the promotion or an exemption applies.

01/12/2004

MOGI 2.1.3

The exemptions for qualifying credit promotions are set out in MCOB 3.2.4 R to MCOB 3.2.7 R. For example, promotions are exempt from the content rules where they contain only a limited amount of information. The rules do not apply to advertisements that contain only a company (or trading) name, a logo, a contact point (address or telephone number) and a brief factual statement of your main occupation.

01/12/2004

Real time and non-real time qualifying credit promotions

MOGI 2.1.4

A real time qualifying credit promotion is any promotion made during a personal visit, telephone call or other interactive dialogue. It does not include e-mail.

01/12/2004

MOGI 2.1.5

A non-real time qualifying credit promotion is simply one that is not a real time promotion. This includes letters, faxes, leaflets, newspaper advertisements, TV and radio commercials.

01/12/2004

Form and content of qualifying credit promotions

MOGI 2.1.6

All qualifying credit promotions must be clear, fair and not misleading (see paragraph 2.1.9).

01/12/2004

MOGI 2.1.7

All non-real time qualifying credit promotions must contain the company (or trading) name and an address or contact point such as a telephone number at which the full address is available. You do not need to name us as your regulator, but if you do, and the qualifying credit promotion contains references to matters that we do not regulate, then you must make it clear what we do not regulate.

01/12/2004

MOGI 2.1.8

Rules covering the content of real time qualifying credit promotions are in MCOB 3.8. You must make clear the purpose of your call or visit, and there are detailed requirements covering when you should terminate the call and preventing you from calling at an unsocial hour.

01/12/2004

Clear, fair and not misleading

MOGI 2.1.9

You must be able to show that you have taken reasonable steps to ensure the qualifying credit promotion is clear, fair and not misleading. MCOB 3.6.4 E sets out how you can comply with this rule. Key points include:

(1) you should not leave out anything, where the exclusion will make the promotion unclear, unfair or misleading;

(2) you should ensure that when describing a feature of a product you give no less prominence to any disadvantage associated with it;

(3) you should ensure the accuracy of statements can be substantiated and the facts on which you make any comparison are verified or relevant assumptions prominently disclosed; and

(4) the design of the promotion should not diminish or obscure the significance of prescribed statements.

01/12/2004

MOGI 2.1.10

Other content requirements apply in specific circumstances depending on the nature of the promotion you publish.

(1) Comparisons (MCOB 3.6.3 R) must objectively compare one or more verifiable and representative features of the qualifying credit, which can include price.

(2) Restrictions on using certain expressions (MCOB 3.6.8 R) - for example, 'overdraft' is only allowed to describe an agreement for running-account credit that allows the consumer to overdraw on a current account. You must use the terms 'early repayment charge' and 'higher lending charge' and not use any other expression to describe such charges (MCOB 3.6.9 R).

(3) Tied products (MCOB 3.6.11 R) - if any qualifying credit is conditional on the consumer buying one or more other product from a specific firm, you must prominently state this in the promotion.

(4) Risk statements (MCOB 3.6.13 R) - unless the promotion is a transient advertisement (e.g. on TV or radio) you must include certain risk statements for given circumstances.

(5) APR (MCOB 3.6.17 R) - you must calculate the APR in line with MCOB 10 and must include it in any promotion which includes price information about the mortgage. You must also use it where the promotion refers to the availability of credit for consumers who might consider their access to credit is restricted.
A specific warning must be used where the promotion is for a product where its price varies according to the specific circumstances of the borrower (MCOB 3.6.25 R).
If the APR can vary (for example because of the circumstances of the borrower), then you must include an APR that is representative of business expected to arise from the promotion (MCOB 3.6.22 R to MCOB 3.6.24 G). This means that at least 66% of consumers responding to the promotion and entering a qualifying credit agreement as a result must be charged an APR at or below the stated APR.

(6) Multi-rate advertising (MCOB 3.6.26 R) -where you advertise qualifying credit which, for example, has a special offer rate applying to it for a short time, the promotion must contain equally clear and prominent descriptions of all the rates that will apply and indicate the period for which each rate is applicable.

(7) Fees for advice or arranging (MCOB 3.6.27 R) -if you publish a promotion for mortgage advice or arranging and you charge a fee for these services, then you must disclose the fee charged. If you do not know this, then you must include a representative fee based on the business you expect to arise from the promotion.

01/12/2004

Cold calling

MOGI 2.1.11

The rules ban unsolicited real time qualifying credit promotions (cold calling), except in limited circumstances (MCOB 3.7.3 R). To be solicited, a qualifying credit promotion must only occur following an express request from the consumer, or be initiated by the consumer (MCOB 3.7.1 R (2)). This will mean that if you get leads from, for example, third-party marketing companies, you will need to ensure the consumer has expressly requested a call from you.

01/12/2004

MOGI 2.1.12

If you have an established existing customer relationship with a consumer you may make unsolicited real time qualifying credit promotions, if the consumer expects to receive such promotions (MCOB 3.7.3 R and MCOB 3.7.4 G).

01/12/2004

MOGI 2.1.13

We have published a series of FAQs that cover this issue in more detail. These are on our website at: www.fsa.gov.uk/mgi/faqs_conduct.html#finproms

01/12/2004

Confirming compliance of qualifying credit promotions

MOGI 2.1.14

Before you communicate or approve a qualifying credit promotion, you must confirm it complies with the rules in MCOB 3. You must ensure this exercise is carried out by someone with appropriate expertise to do so (MCOB 3.9.1 R).

01/12/2004

Withdrawing compliance

MOGI 2.1.15

If at any time after you have approved or communicated a qualifying credit promotion, you become aware that it no longer complies with these rules, you must ensure the promotion is withdrawn as soon as practicable (MCOB 3.9.3 R). This will include stopping communication, withdrawing compliance and telling anyone who you know is relying on the communication.

01/12/2004

MOGI 2.2

Advising and selling standards (MCOB 4)

01/12/2004

Introduction

MOGI 2.2.1

This section of the Guide sets out the advising and selling rules in chapter 4 of MCOB (MCOB 4). These rules apply generally to mortgage intermediaries. There are separate obligations depending on whether you give mortgage advice or not.

01/12/2004

What is the scope of service?

MOGI 2.2.2

When advising on or selling mortgages you must take reasonable steps to ensure the service you offer (MCOB 4.3.1 R) is based on:

(1) whole of market;

(2) a limited number of lenders; or

(3) a single lender.

01/12/2004

MOGI 2.2.3

If you offer a whole of market service, you must consider a sufficiently large number of mortgages generally available from the market. This consideration needs to be informed by adequate knowledge of the current mortgage market (MCOB 4.3.4 R). You can use a panel of representative firms to provide a whole of market service (MCOB 4.3.6 G (2)).

01/12/2004

What must I do if I want to describe myself as 'independent'?

MOGI 2.2.4

If you wish to describe yourself as 'independent' you must intend to:

(1) offer a whole of market service; and

(2) give the consumer the option of paying a fee that will be the only remuneration you receive for the service (MCOB 4.3.7 R). If the consumer exercises this option, you will have to pay them any commission you receive on the mortgage sale.

01/12/2004

MOGI 2.2.5

If you sell both mortgages and investments, you can choose to be 'independent' for mortgages but not for investments (or vice versa). However, you will need to take care to ensure that consumers correctly understand the scope of the service you are providing (MCOB 4.3.8 G (2)). Remember, all your communications with consumers must be clear, fair and not misleading.

01/12/2004

What must I tell consumers about my mortgage service?

MOGI 2.2.6

When you anticipate giving a consumer advice or personalised information about a mortgage, you must give them an initial disclosure document or IDD (MCOB 4.4.1 R). The IDD explains to the consumer:

(1) how to use the disclosure;

(2) the scope of service you offer. If you base your service on a limited number of lenders you must tell the consumer that he can ask for a list (MCOB 4.4.6 R);

(3) the service that you will provide;

(4) what he will have to pay for your service;

(5) whether any fees are refundable;

(6) your regulated status;

(7) your contact point if he has a complaint; and

(8) that you are covered by the Financial Services Compensation Scheme and the level of protection provided.

01/12/2004

MOGI 2.2.7

If dealing with a consumer on the telephone, you must tell them certain pieces of this information (MCOB 4.4.7 R (1)(a) - MCOB 4.4.7 R (1)(d)). After the call, provided that you think the consumer is still eligible for the mortgages you offer and you have his contact details, you must then send him an IDD within five working days (MCOB 4.4.7 R (2)).

01/12/2004

MOGI 2.2.8

The initial disclosure document will promote consumer understanding about the services on offer. You must give an IDD out as early as you can within a mortgage discussion. However, you do not have to give out the IDD when the consumer is simply booking a mortgage appointment (MCOB 4.4.3 G (2)).

01/12/2004

MOGI 2.2.9

Where you are also advising on or selling general insurance or investments, you can instead give out a combined initial disclosure document. This means you can describe the service you are providing on all these products in one place (MCOB 4.4.1 R (1)(c)(ii)).

01/12/2004

What are the requirements for advised sales?

MOGI 2.2.10

The rules on advised sales are in MCOB 4.7 (Suitability). These rules apply when you make a "personal recommendation" (this term has a special meaning - see Appendix A for further details) to a consumer to buy or sell a regulated mortgage contract.

01/12/2004

MOGI 2.2.11

A personal recommendation has three elements:

(1) you must give advice relating to the merits of the borrower entering into, or varying the terms of, a regulated mortgage contract;

(2) the advice must relate to a specific mortgage e.g. "I recommend ABC Building Society's 2 year fixed rate mortgage at 4.6%"; and

(3) the advice must be to a specific person in his capacity as borrower or potential borrower.

01/12/2004

MOGI 2.2.12

There is guidance on the regulated activity of 'advising on regulated mortgage contracts' in the guidance in the Authorisation manual (AUTH App 4.6).This will shortly be transferred to a new Perimeter Guide outside the Handbook (with the shortened title of PERG).

31/05/2005

MOGI 2.2.13

Where you give advice, you must not recommend a mortgage (or a variation to an existing mortgage) unless it is suitable for the consumer (MCOB 4.7.2 R). (The table in paragraph 2.2.14 explains the suitable advice rules.) Your assessment of suitability (MCOB 4.7.4 R) must address the following questions:

(1) can the consumer afford a mortgage? If the answer is no, you must not recommend a mortgage;

(2) what mortgages are appropriate to the consumer's needs and circumstances? If you do not have access to an appropriate type of mortgage you must not recommend a mortgage; and

(3) of the appropriate mortgages available through you, which is the most suitable?

01/12/2004

MOGI 2.2.14

The suitable advice rules:

01/12/2004

MOGI 2.2.15

When deciding if a mortgage is affordable, you must explain that you are basing your assessment on:

(1) current rates, which may rise in the future; and

(2) the consumer's current circumstances, which may change (MCOB 4.7.5 R).

01/12/2004

MOGI 2.2.16

You can generally base your assessment of affordability on information from the consumer, unless you have reason to doubt it (MCOB 4.7.8 G).

01/12/2004

MOGI 2.2.17

Where one of the major purposes of the mortgage is to consolidate existing debts, you must also consider the following in assessing suitability:

(1) the costs associated with extending the period for repaying existing debts;

(2) if it is appropriate to secure any existing unsecured debt; and

(3) whether it would be better for a consumer already in payment difficulties to negotiate an arrangement with their existing creditors (MCOB 4.7.6 R).

01/12/2004

MOGI 2.2.18

There are a range of factors you should consider when assessing if a mortgage is appropriate to the consumer's needs and circumstances (MCOB 4.7.11 E). These include the consumer's preference or need for:

(1) payment stability, especially having regard to the impact of future interest rate changes;

(2) reduced payments at the outset; and

(3) product features such as payment holidays, cashbacks etc.

01/12/2004

MOGI 2.2.19

To identify the most suitable of the appropriate mortgages you have available, you can use 'price' as a basis. In this case, 'price' means the least expensive mortgage based on those elements of price the consumer told you were most important (MCOB 4.7.13 E). Depending on what the consumer told you, this could be, for example, the overall cost, the lowest cost over a given period or the absence of early repayment charges.

01/12/2004

MOGI 2.2.20

You can recommend a mortgage on a basis other than 'price', for example because another lender has a more flexible underwriting approach (MCOB 4.7.14 G (2)). If you do this, you still need to have reasonable grounds to conclude that the mortgage is the most suitable of those that you offer.

01/12/2004

MOGI 2.2.21

Where you give advice you must keep, for three years, a record:

(1) of the information you gained from the consumer, including that relating to their needs and circumstances; and

(2) that explains why any recommendation given is suitable for the consumer, including (if this is the case) the reasons you used a criterion other than 'price' to identify the mortgage recommended (MCOB 4.7.17 R).

01/12/2004

What are the requirements for non-advised sales?

MOGI 2.2.22

Where you do not give advice but instead give information only, any questions you ask about the consumer's needs and circumstances must be scripted (MCOB 4.8.1 R).

01/12/2004

MOGI 2.2.23

Any person using scripted questions in a non-advised sale must be:

(1) trained in using the script;

(2) trained in the difference between giving advice and giving information; and

(3) aware that advice must not given - unless that person is appropriately trained and competent (MCOB 4.8.3 R).

01/12/2004

MOGI 2.2.24

If you have staff that are not competent to give advice on mortgages and they use scripted questions in non-advised sales, they should be appropriately supervised. This is to ensure that they stick to the script when asking questions about the consumer's needs and circumstances and do not give advice (MCOB 4.8.4 R).

01/12/2004

MOGI 2.2.25

You must keep a record of the scripted questions you are using. The scripted questions must be clear, fair and not misleading (MCOB 4.8.5 G (1)). When you change the script you must make a record, and keep a record of the previous script for one year (MCOB 4.8.7 R).

01/12/2004

MOGI 2.3

Pre-sale disclosure (MCOB 5)

01/12/2004

Introduction

MOGI 2.3.1

This section of the Guide sets out the pre-sale information rules in chapter 5 of MCOB (MCOB 5). These rules set out our product information requirements for standard mortgages. They require all firms to give a consumer product information in a set format, called a key facts illustration (KFI), at specific stages of the mortgage sales process. The term "illustration" has a special meaning in the rules - see Appendix A.

01/12/2004

Key facts illustration (KFI)

MOGI 2.3.2

You must give consumers personalised product information, in the form of a KFI, at an early stage in the buying process. It enables consumers to compare different products easily and so helps them to shop around. It also ensures they receive the information they need to help them decide whether to apply for a particular mortgage.

01/12/2004

MOGI 2.3.3

The rules about the content of the KFI are in MCOB 5.6. You only need to read these in detail if you are creating your own KFI. You should, however, ensure that you are familiar with the content of the KFI even if a lender or a mortgage sourcing system produces the KFI for you. You should reassure yourself that it accurately reflects the terms and conditions of the product you are recommending or providing information about in a way that is clear, fair and not misleading.

01/12/2004

MOGI 2.3.4

You must also explain to a consumer the importance of reading and understanding the KFI (MCOB 5.4.10 R). Typically in a face-to-face meeting you will use the KFI to explain the features of a mortgage, prompting a consumer to ask questions.

01/12/2004

When do you have to provide a KFI?

MOGI 2.3.5

You must provide a consumer with a KFI in certain circumstances (MCOB 5.5.1 R):

(1) when you recommend a particular mortgage to a consumer;

(2) when you provide written information that is specific to the amount the consumer wants to borrow on a particular mortgage;

(3) without unnecessary delay, if a consumer requests written information that is specific to the amount they wish to borrow on a particular mortgage; or

(4) before the consumer applies for a particular mortgage.

01/12/2004

MOGI 2.3.6

A consumer must always have the opportunity to consider the terms and conditions of a mortgage in the form of a KFI before committing themselves to an application (MCOB 5.5.4 R). You cannot take fees from a consumer or submit a formal application for a mortgage to a lender before you give the consumer a KFI for that particular mortgage. If you provide a KFI and there are any material changes to the mortgage before the consumer makes an application, you must give him a new KFI (MCOB 5.5.8 R) before submitting the application.

01/12/2004

Who is responsible for the accuracy of the KFI?

MOGI 2.3.7

If you obtain a KFI for a consumer from a lender, that firm is responsible for its accuracy. Otherwise you are responsible. A tolerance of 1% or £1 (whichever is the greater) applies to some figures on the KFI where you do not get them directly from the lender (MCOB 5.4.3 R). You can rely on a third party, such as a mortgage sourcing system provider, to provide you with KFIs that meet this tolerance, and still comply with the rules on accuracy. However, this is only as long as you can show that it was reasonable for you to rely on information provided to you by the sourcing system provider (MCOB 2.5).

01/12/2004

Can you provide cost information that is not in the form of a KFI?

MOGI 2.3.8

Written quotation information that you give to a consumer must be in the form of a KFI. However you can:

(1) provide general product information that is not specific to the amount the consumer wishes to borrow;

(2) provide verbal quotes, for example on the telephone. Where you do this, you should encourage the consumer to receive a KFI; and

(3) use a screen to show mortgage cost information to a consumer (although you should not print this for them if it is not in the form of a KFI).

01/12/2004

MOGI 2.3.9

If the consumer uses a 'self-help' electronic medium, such as a website, to get 'quick quote' information, there are extra requirements. We prescribe text that firms offering such a facility must use to tell the consumer of the limitations of the information and encourage them to get a KFI before making a decision (MCOB 5.4.14 R (1)).

01/12/2004

MOGI 2.3.10

You do not need to provide a KFI if, based on discussions with a consumer, he is not eligible, does not wish to continue an enquiry or does not give you enough personal details to enable you to provide one. You must not provide a KFI for a mortgage for which the consumer is clearly ineligible.

01/12/2004

Can you use generic application forms?

MOGI 2.3.11

An application must be specific to the mortgage product the consumer is applying for, that is, it should identify the type of interest rate, the rate of interest, and the lender at the point it is submitted by the consumer (MCOB 5.3.2 G). If a lender declines an application and you wish to place it with another lender, you must first ensure that you give the consumer a KFI on the new lender's product before submitting the new application.

01/12/2004

When can you obtain an approval in principle for a consumer?

MOGI 2.3.12

You can obtain an approval in principle for a consumer before providing them with a KFI if that is what the consumer wants (MCOB 5.5.6 G). Often though, given the KFI triggers described earlier, you will also need to provide a KFI.

01/12/2004

Content of the KFI

MOGI 2.3.13

You should have a good understanding about the content of a KFI. The following issues are likely to be particularly relevant as they require you to vary the content of the KFI depending on the service you offer.

01/12/2004

Level of service

MOGI 2.3.14

Section 2 of the KFI requires you to state whether you are recommending the mortgage in the KFI to a consumer or simply providing him with information.

01/12/2004

Disclosure of fees

MOGI 2.3.15

You must disclose any fees that you will charge for advising on or arranging the mortgage in Section 8 of the KFI in the section 'Other fees'. This must state who the fee is payable to, when it is payable and whether it is refundable. The total amount payable and the APR shown in Section 5 of the KFI will need to include this fee.

01/12/2004

Inclusion of insurance products or a repayment vehicle in the KFI

MOGI 2.3.16

You may include in the KFI a quotation for an optional repayment vehicle to repay an interest-only mortgage in Section 6 of the KFI or for optional insurance products in Section 9. You can only include a brief description of such products but may refer to a detailed summary, such as a policy summary that complies with ICOB (see Section 3.4 of Part III).

01/12/2004

Tied products

MOGI 2.3.17

Section 4 must include details of any tied products that you or the lender require as a condition of the mortgage. The KFI will include further details of the product in the relevant section (for example Section 9 - Insurance).

01/12/2004

MOGI 2.3.18

The KFI does not need to include a quotation, however you should give the consumer an accurate quotation about the cost of any tied product before he applies (including products required by the lender). If you do not, then you must provide it as soon as possible afterwards and in good time before the consumer receives a mortgage offer. If you do not provide the consumer with an accurate quotation before he applies then he will have the right, for seven days from the day he receives an accurate quotation, to withdraw his application with a refund of all fees (except those payable for providing advice).

01/12/2004

Commission disclosure

MOGI 2.3.19

Section 13 of the KFI must include full details of any payments the lender makes to a mortgage intermediary and any third parties. This includes payments made to a network, packager and appointed representative (except appointed representatives of lenders). If you will pass to the consumer all or part of the commission you receive from the lender, the KFI may state this.

01/12/2004

MOGI 2.3.20

A firm need not disclose a fee paid by a lender for pure outsourced arrangements to process applications as long as the mortgage intermediary is not connected to the firm undertaking the outsourced activities (for example, through a network arrangement or through common ownership).

01/12/2004

Unsure whether the mortgage is a regulated mortgage?

MOGI 2.3.21

You should not issue a standard KFI when the mortgage is clearly not a regulated mortgage (for example, a buy-to-let mortgage and the tenant is not related to the borrower). If you are unsure about whether a mortgage enquiry is about a regulated mortgage then you should obtain further information to enable you to assess this. Unless you have reasonable evidence that the contract is not regulated, you should provide the consumer with a KFI.

01/12/2004

MOGI 2.4

Disclosure at the offer stage (MCOB 6)

01/12/2004

Introduction

MOGI 2.4.1

This section of the Guide sets out the offer stage disclosure rules in chapter 6 of MCOB (MCOB 6). These rules set out our requirements for mortgage offers. Although MCOB 6 only applies to lenders, they may need to ask you to give them information to help them prepare the offer. For example, they may ask you to confirm the level of service you provided and details of any fees you may have charged.

01/12/2004

When is an offer document required?

MOGI 2.4.2

A lender must provide an offer document which complies with the rules in MCOB 6 when making an offer to a consumer for a new mortgage or for the following variations to a mortgage: further advances; adding or removing a party to the mortgage (transfers of equity); and product switches (transferring all or part of the mortgage to a new rate).

01/12/2004

What does the offer document contain?

MOGI 2.4.3

The offer document must include an updated and suitably-adapted KFI as an integral part of the offer rather than a separate document (MCOB 6.4.9 R). MCOB 6.4.7 R allows a lender to include greater detail within the specified sections of the KFI than allowed by MCOB 5. Lenders may also add extra information at the beginning and at the end of the offer document.

01/12/2004

MOGI 2.5

Disclosure at start of contract and after sale

01/12/2004

Introduction

MOGI 2.5.1

This section of the Guide sets out the after sale disclosure rules in chapter 7 of MCOB (MCOB 7). These rules apply mainly to mortgage lenders and require them to give out certain information after the mortgage is taken out (such as disclosure at the start of the contract and annual statements). However, the rules on further advances and other post-sale changes to mortgage contracts also apply to mortgage intermediaries where they arrange or give advice on such changes.

01/12/2004

Further advances

MOGI 2.5.2

Where you arrange or give advice on a further advance that the lender must approve, you must give the consumer a KFI before he applies for the further advance, unless one has already been provided or the further advance is for a business purpose (MCOB 7.6.7 R). This KFI must be in the format required by MCOB 5 and be based on the amount of the further advance only. The rules require you to make some changes to the KFI to reflect its use for a further advance. In preparing a KFI for a further advance, you may generally rely on information given by the consumer (such as the amount of his existing mortgage) unless you have reason to doubt it (MCOB 7.6.11 G).

01/12/2004

Rate switches

MOGI 2.5.3

Where you arrange or give advice to a consumer to change all or part of their mortgage from one interest rate to another (such as a transfer from a variable rate to a fixed rate mortgage) you must give the consumer a KFI for the amount of the whole loan before he applies for the new mortgage, unless a KFI has already been provided (MCOB 7.6.18 R). The KFI must be in the format required by MCOB 5, with appropriate changes.

01/12/2004

Addition or removal of a party to the contract

MOGI 2.5.4

Where you arrange or give advice to a consumer to add or remove a party to a mortgage (for example, to remove one partner from the mortgage in the event of divorce) you must give the consumer a KFI before he applies for the revised mortgage (MCOB 7.6.22 R). The KFI must be in the format required by MCOB 5, with appropriate changes.

01/12/2004

Two changes at the same time

MOGI 2.5.5

Where a consumer requests a product switch and the additional or removal of a party to the mortgage at the same time, you can give the consumer a single KFI covering both changes (MCOB 7.6.33 G).

01/12/2004

MOGI 2.6

Lifetime mortgages: advising and selling standards (MCOB 8)

01/12/2004

Introduction

MOGI 2.6.1

This section of the Guide explains the advising and selling rules for lifetime mortgages in chapter 8 of MCOB (MCOB 8). These rules apply to mortgage intermediaries selling such mortgages. There are separate requirements depending on whether you give advice or not.

01/12/2004

MOGI 2.6.2

Some rules are the same as those that apply to standard mortgages. They cover the scope of service (including whole of market requirements) and independence.

01/12/2004

MOGI 2.6.3

However, we have treated the lifetime mortgage market as a separate mortgage market. So when we refer to the whole market in MCOB 8, we mean the whole market for lifetime mortgages (MCOB 8.3.2 R).

01/12/2004

Initial disclosure

MOGI 2.6.4

The rules relating to standard mortgages also apply here, but with two differences. Firstly, the IDD is tailored to reflect the particular features of lifetime mortgages. It also includes a warning to consumers to take advice if they are at all unsure about which lifetime mortgage or home reversion scheme is right for them. Secondly, if you sell home reversion schemes as well as lifetime mortgages, you must disclose this on the IDD (MCOB 8.4.1 R).

01/12/2004

Advised sales

MOGI 2.6.5

You must meet our training and competence requirements if you advise on lifetime mortgages (see Chapter 3 of this Part).

01/12/2004

MOGI 2.6.6

You must take reasonable steps to ensure that you do not recommend that a consumer takes out a lifetime mortgage, or varies an existing lifetime mortgage, unless it is suitable for that consumer (MCOB 8.5.2 R). When you are assessing suitability, there are several factors you need to consider. We have explained these in the form of a diagram at Appendix B.

01/12/2004

MOGI 2.6.7

If you also sell home reversion schemes and, as a result of your suitability assessment you recommend a home reversion scheme to the consumer, this does not constitute regulated advice.

01/12/2004

Non-advised sales

MOGI 2.6.8

Some staff involved in non-advised sales must meet our training and competence requirements (see Chapter 3 of this Part).

01/12/2004

MOGI 2.6.9

The rules relating to standard mortgages apply here, but with some additions. The scripted questions must cover the following subjects:

(1) whether the consumer is eligible for the lifetime mortgage;

(2) the consumer's preferences for his estate;

(3) the consumer's health and life expectancy;

(4) the consumer's future plans and needs (for example, whether he is likely to need to raise further funds or move house);

(5) whether the consumer has a preference or need for stability in the amount of payments (where payments are required);

(6) whether the consumer has a preference or need for any other features of a lifetime mortgage or a home reversion scheme;

(7) whether the consumer has considered alternative methods of raising the required funds, and in particular a home reversion scheme or where relevant, a grant; and

(8) whether the consumer has established whether either his entitlement to means-tested benefits or his tax position or both will be adversely affected.

01/12/2004

MOGI 2.6.10

In non-advised sales you should encourage the consumer to seek advice if he is unsure about making his own choice. For grants, benefits and tax issues, you should, where relevant, encourage the consumer to seek further information from an appropriate source such as his local authority or Citizens Advice Bureau (or other similar agency).

01/12/2004

MOGI 2.7

Lifetime mortgages: product disclosure (MCOB 9)

01/12/2004

Introduction

MOGI 2.7.1

This section of the Guide explains the rules that apply to product disclosure for lifetime mortgages in chapter 9 of MCOB (MCOB 9). These rules apply to firms who sell lifetime mortgages.

01/12/2004

Pre-sale disclosure - general

MOGI 2.7.2

You must give consumers personalised product information in the form of a KFI early in the sales process.

01/12/2004

MOGI 2.7.3

Because some areas of the MCOB 9 rules are very similar to those for standard mortgages in MCOB 5, we have included tables at MCOB 9.3.2 R to MCOB 9.3.4 R to show how the standard mortgage rules should be amended for lifetime mortgages.

01/12/2004

Content of the key facts illustration

MOGI 2.7.4

The lifetime mortgage KFI is different from the standard version to reflect the different risks and characteristics of lifetime mortgage products. For example, there is a general explanation of lifetime mortgages, sections setting out benefits and risks and a projection of the increase in debt where interest rolls up.

01/12/2004

MOGI 2.7.5

The rules about the content of the lifetime mortgage KFI are in MCOB 9.4. You will need to read them in detail if you are creating your own KFI, but you should be familiar with them even if you are using KFIs provided by lenders or a sourcing system. You should make sure you are comfortable that a KFI is an accurate reflection of the lifetime mortgage product you are advising or giving information on. You must also explain to the consumer the importance of reading and understanding the KFI.

01/12/2004

Post-sale disclosure

MOGI 2.7.6

The post sale requirements are broadly the same as for standard mortgages, but some of the individual rules have been amended to allow for the particular characteristics of lifetime mortgages. For example, the rules on further advances include details of how we expect you to deal with the estimated term of the lifetime mortgage.

01/12/2004

MOGI 2.8

Annual percentage rate (MCOB 10)

01/12/2004

MOGI 2.8.1

This section of the Guide explains the rules in chapter 10 of MCOB (MCOB 10) that set out how to calculate the APR. There are several occasions when you might need to state an APR, including in financial promotions and KFIs. The rules outline which costs are (and are not) included in the APR. These rules are very similar to the Consumer Credit (Total Charge for Credit) Regulations 1980. We have made minor changes, for example, to ensure consistency of wording with our other rules.

01/12/2004

MOGI 2.8.2

If you produce any material where MCOB requires you to state the APR, then you must calculate it in line with these rules.

01/12/2004

The calculation

MOGI 2.8.3

Any charge that the consumer must pay to obtain credit must go into the APR calculation. The APR is therefore an indication of the true cost of the credit, taking into account all fees and charges as well as interest.

01/12/2004

MOGI 2.8.4

This includes all fees and charges payable to the lender or any third party. It will also include any fee you charge for advising on or arranging a mortgage.

01/12/2004

MOGI 2.8.5

You also include the cost of any tied products that the consumer must take out. For example, if you require a consumer to take buildings insurance as a condition of arranging a mortgage, the premium must go into the calculation.

01/12/2004

MOGI 2.8.6

Some fees and charges are excluded from the calculation (MCOB 10.4.4 R) including money transmission charges and non-tied buildings and contents insurance.

01/12/2004

MOGI 2.8.7

The rules set out the assumptions you must use to calculate the APR. For example, you must not include a fee that you add to the loan as part of the credit. There are also rules about how you should calculate an APR for a further advance and what assumptions you must make about interest rates at the end of a special offer period.

01/12/2004

MOGI 2.9

Responsible lending (MCOB 11)

01/12/2004

Introduction

MOGI 2.9.1

This section of the Guide explains the rules on responsible lending in chapter 11 of MCOB (MCOB 11). These rules oblige lenders to lend responsibly. They do not apply to mortgage intermediaries. However, you will find it useful to understand the rules because:

(1) a lender may seek information from you to help it make a responsible lending decision; and

(2) they supplement the need for you to consider the affordability of the mortgage for the consumer when giving advice.

01/12/2004

Has account been taken of the consumer's ability to repay?

MOGI 2.9.2

When making a mortgage offer, or agreeing a further advance, a lender must be able to show that it took account of the consumer's ability to repay (MCOB 11.3.1 R). This rule reflects the Principle 6 requirement to pay due regard to the interests of consumers, and to treat them fairly (see section 3.2 of Part I).

01/12/2004

MOGI 2.9.3

The rules do not prescribe the steps a lender must take when assessing ability to repay. We recognise that sometimes a lender may rely on self-certification by the consumer. However, the lender will have to decide in what circumstances this is appropriate. In doing this, the lender will need to consider both the interests of the consumer and the reliance they can place on the information provided (MCOB 11.3.2 R).

01/12/2004

MOGI 2.9.4

The rules assume, unless there is evidence to the contrary, that regular mortgage payments will come from income. So, knowledge of income is generally expected to underpin the responsible lending decision (MCOB 11.3.5 G). Similarly, the lender will need to consider ability to repay from means other than income, where the consumer has said this is the case (MCOB 11.3.7 G).

01/12/2004

MOGI 2.9.5

A lender may choose to draw on many sources for information on which to base a responsible lending decision. You may well be one of these, especially where the consumer is acting on a recommendation you made. This is because you will have considered affordability when recommending a mortgage.

01/12/2004

MOGI 2.10

Charges (MCOB 12)

01/12/2004

Introduction

MOGI 2.10.1

This section of the Guide explains the rules on charges in chapter 12 of MCOB (MCOB 12). The rules on excessive charges in this chapter apply to mortgage intermediaries. There are also rules in MCOB 12 on early repayment charges and arrears charges, but these only apply to mortgage lenders.

01/12/2004

Excessive charges

MOGI 2.10.2

The charges that you make to a consumer when advising on or arranging a mortgage must not be excessive (MCOB 12.5.2 R).

(1) In determining whether a charge is excessive, you should consider:

(2) the amount of the charge for the service compared to charges for similar services available elsewhere;

(3) the degree to which the charges are an abuse of the trust the consumer has placed in you; and

(4) the nature and extent of the disclosure of the charges to the consumer.

01/12/2004

MOGI 2.11

Arrears and repossessions (MCOB 13)

01/12/2004

Introduction

MOGI 2.11.1

This section of the Guide explains the rules on arrears and repossessions in chapter 13 of MCOB (MCOB 13). These rules apply to mortgage lenders and mortgage administrators, but if you undertake any debt collection work the chapter may apply to you.

01/12/2004

Fair treatment

MOGI 2.11.2

The rules require firms to deal fairly with consumers in arrears, facing repossession or who have a shortfall debt after the sale of a property, for example, after it has been repossessed. The firm must operate in line with a written arrears policy which must be agreed by its governing body (for example your board of directors, or if you are a sole trader, the sole trader). The rules set out what we consider to be fair treatment of consumers in these circumstances.

31/05/2005

Information requirements

MOGI 2.11.3

The rules require firms to give borrowers information about the state of their mortgage as soon as possible (and no later than 15 business days) after they first go into arrears. The term 'arrears' has a special meaning in the rules (see Appendix A). This means that there are trigger points for when the firm must provide the information.

01/12/2004

MOGI 2.11.4

The firm must also send the borrower a statement at least once a quarter where the payment shortfall is attracting charges. This includes when the arrears are attracting interest at a different rate to the main mortgage.

01/12/2004

MOGI 3

Training and Competence sourcebook

MOGI 3.1

Training and Competence

01/12/2004

Introduction

MOGI 3.1.1

This chapter of the Guide explains the rules on training and competence. They are in a separate section of our Handbook called the Training and Competence sourcebook (TC). Our rules on training and competence apply to mortgage intermediaries.

01/12/2004

MOGI 3.1.2

If your staff have met the MCCB's Fitness and Competence requirements by 31 October 2004, transitional (or grandfathering) arrangements will apply (see paragraph 3.1.13).

01/12/2004

General information on the Training and Competence sourcebook

MOGI 3.1.3

There are two sections in TC. The first section (TC1) contains the Commitments which say that it is firms' responsibility to ensure that individuals:

(1) are (and remain) competent for the work they do;

(2) are appropriately supervised;

(3) have their competence regularly reviewed; and

(4) have a level of competence appropriate for the nature of the business.

The Commitments apply to any staff associated with a regulated activity.

01/12/2004

MOGI 3.1.4

The second section of TC (TC2) contains detailed requirements that apply in addition to the Commitments, including recruitment, training, attaining and maintaining competence, appropriate examinations, supervising and record keeping.

01/12/2004

Advising on standard mortgages

MOGI 3.1.5

The requirements in TC1 and TC2 apply to advisers. Unless the transitional arrangements apply, from 31 October 2004 an adviser can only advise on standard mortgages if he has been assessed as competent, or is under appropriate supervision and has passed the regulatory module of an appropriate examination.

01/12/2004

MOGI 3.1.6

To be assessed as competent to advise on standard mortgages, the adviser must have passed an appropriate examination and been assessed as competent to apply the necessary knowledge and skills without supervision. TC 2.4 contains the full details on attaining competence. The Financial Services Skills Council is currently working with examination providers on the development of updated examinations. It will also be issuing lists of appropriate examinations for regulated mortgage activities.

01/12/2004

MOGI 3.1.7

You must make sure that all advisers (including those grandfathered) receive ongoing training and maintain their competence. These should take into account technical knowledge, skills and changes in the market, and changes to products, legislation and regulation. You must also make sure that advisers are appropriately supervised. Supervisors are not themselves required to have passed a mortgage examination. TC 2.6 and 2.7 cover maintaining competence and supervision.

01/12/2004

MOGI 3.1.8

You must keep records to demonstrate that you have complied with the rules in TC2.

01/12/2004

Non-advised sales of standard mortgages

MOGI 3.1.9

Only the Commitments in TC1 apply to sales staff who only carry out non-advised sales of standard mortgages. So they do not need to pass an examination.

01/12/2004

Advising on lifetime mortgages

MOGI 3.1.10

The requirements in TC1 and TC2 also apply to those advising on lifetime mortgages. Unless the transitional arrangements apply, from 31 October 2004 lifetime mortgage advisers must take an appropriate lifetime mortgage examination in addition to an appropriate standard mortgage examination. They must also be assessed as competent to apply the necessary knowledge and skills without supervision. Again, the Financial Services Skills Council is working with examination providers on the development of lifetime mortgage examinations.

01/12/2004

Non-advised sales of lifetime mortgages

MOGI 3.1.11

Only the Commitments in TC1 apply to other staff carrying out non-advised sales of lifetime mortgages. So they do not need to pass an examination.

01/12/2004

MOGI 3.1.12

However, the full training and competence requirements in TC1 and TC2 also apply to staff who supervise non-advised sales and to staff designing scripted questions for us in non-advised sales. So, unless the transitional arrangements apply, from 31 October 2004 they must have passed an appropriate lifetime mortgage examination in addition to an appropriate standard mortgage examination. They must also be assessed as competent to apply the necessary knowledge and skills without supervision.

01/12/2004

Transitional arrangements

MOGI 3.1.13

Where staff carrying out certain activities (set out in 3.1.14) have met the MCCB's Fitness and Competence requirements before 31 October 2004 they do not need to pass any further examination. That means they must have taken an examination as required by the MCCB, and you must have assessed them as competent. However, it is also your responsibility to make sure that they maintain competence (see TC 2.6), so you must ensure that they are familiar with the new mortgage rules. As well as the requirement to maintain competence, the recruitment, training, supervision and record keeping requirements in TC2 will apply after 31 October 2004.

01/12/2004

MOGI 3.1.14

The activities are:

(1) advising on standard mortgages;

(2) advising on lifetime mortgages;

(3) supervising sales staff carrying out non-advised lifetime mortgage sales; and

(4) designing scripted questions for use in non-advised lifetime mortgage sales.

01/12/2004

Proposed amendments to TC

MOGI 3.1.15

We are currently consulting on some amendments to TC. These proposed amendments are designed to distinguish between the supervision of staff who are not assessed as competent and the monitoring of staff once they are assessed as competent.

01/12/2004

MOGI 3.1.16

The current wording in TC does not make this distinction and has led to uncertainty at some firms. These proposed amendments are simply to clarify the position and do not change the level of oversight required.

01/12/2004

MOGI App

Appendix A: brief description of terms in Part II

MOGI AppA

Appendix A: brief description of terms in Part II

01/12/2004

MOGI AppA 1.1

Defined term

Meaning

Arrears

A shortfall that a consumer has in payments due on his mortgage equivalent to two or more regular payments.

Distance contract

A contract concluded without any face-to-face contact with the consumer (by telephone, internet, email or post).

Durable medium

In a form that a consumer can keep and refer to as needed. It can include paper, disk and e-mail.

Financial promotion

An advertisement, brochure, mailshot, telemarketing or sales aid.

Illustration

The key facts illustration (KFI) describing the costs and features of a mortgage.

Lifetime mortgage

A mortgage aimed at older consumers and designed to release equity to provide a lump sum or income.

Mortgage adviser

A firm that advises on regulated mortgages.

Mortgage arranger

A firm that arranges regulated mortgages or makes arrangements with a view to regulated mortgages.

Mortgage intermediary

A firm that advises, arranges or makes arrangements with a view to regulated mortgages.

Mortgage mediation activity

Advising on, arranging or making arrangements with a view to regulated mortgages.

Non-real time qualifying credit promotion

A financial promotion relating to a mortgage that is not made in during a personal visit, telephone call or other interactive manner, for example a newspaper advertisement, TV commercial, leaflet or a mailshot.

Personal recommendation

A recommendation given to a specific person (or group or people) to take out or vary a particular regulated mortgage.

Qualifying credit

Any secured credit provided by a lender who is authorised for mortgage activities.

Real time qualifying credit promotion

A financial promotion made in the course of a telephone call, personal visit or any other interactive manner (but not including a financial promotion made by e-mail).

Regulated mortgage contract (RMC)

A loan to an individual secured by first charge on land in the UK, where the property is to be at least 40% used by the borrower or a member of his immediate family. Second charge loans are therefore not RMCs and buy-to-let mortgages are extremely unlikely to be RMCs.

01/12/2004

MOGI AppB

Appendix B: Lifetime Mortgages: advising and selling - assessment of suitability

MOGI AppB 1

Lifetime Mortgages: advising and selling - assessment of suitability

01/12/2004

MOGI AppB 1.1

01/12/2004