Ben Allen, Head of Compliance
With the Mortgage Credit Directive coming in to force on 21st March 2016 and with many lenders already having switched over to their ‘post MCD’ processes I wanted to take a few moments to go over the changes to initial disclosure and to recap on the existing requirements that are to remain.
MCOB 4 and MCOB 4.4A set out what the initial disclosure requirements are. These rules require intermediaries to provide information on their service in good time before providing the service itself; specific inclusions are:
- Firm identity and address
- Details relating to regulation and the FS register
- Whether the intermediary is a mortgage adviser
- Complaints process including details about the FoS.
MCD also states that firms paid commission must tell consumers that they have the right to ask for information on the commissions paid by the lenders for which it is acting. We have included a statement to this effect in the revised documents which can be found in the Document Library.
Advisers also need to give consideration to which products the will be offering, this is particularly relevant when considering second charge lending. If there are to be any limitations on the range of products offered this will need to be explained in the disclosure document. As a network, we have taken the decision to offer CBTL and Second charge loans, therefore no restrictions have been imposed by the network regarding these products.
Independence
With the changes under the MCD and previously under MMR you can be forgiven for being somewhat unclear as to whether you can use the term ‘Independent’ in communications with clients. The FCA, by their own admission, have not seen the need to be prescriptive regarding the use of the term ‘independent’, however, they are at pains to ensure that anyone who uses the term, can only do so if it truly reflects the scope of their service (e.g. where there is no restriction from across the whole product range). Effectively, to class yourself as independent you must not be limited in terms of lender and product types that you offer.
Regarding use of the term ‘unlimited’, MCOB 4.4A.5 states that a firm may be able to describe its product range as unlimited even if it offers its customers only a selection of the regulated mortgage contracts available from the relevant market, or uses panels, provided any panel, or selection of products, is sufficiently broad in its composition that it is representative of products from across the market.
You will therefore note that section 2 qualifies whose products are offered by referring to a ‘comprehensive’ range of mortgage from across the market.
Distance Contracts
Distance contracts are subject to additional regulation, therefore if you conduct business remotely (Phone, email or via the internet etc.) then you will be subject to additional requirements – Your compliance manger will be able to provide additional guidance in this regard. Further information is available in MCOB 4.4A.18 – 4.4A.20
Please take time to review the revised disclosure documents and to make sure you are familiar with the alterations.
As always, should you have any queries please approach your Compliance Manager.
