FCA compliance and the Mortgage Credit Directive
Written by Charlie Palmer on 10/08/2018

Buy to Let: When prompted by the FCA you will need to log into connect and complete a questionnaire on the subject. If you are not prompted there is a problem with your permissions and this will prevent you doing B2L mortgages. Now read this very carefully and get advice if unsure. To be a simple mortgage broker today you need a very complicated set of additional permissions. The three consumer credit permissions you need for mortgage broking are these Credit Broking Debt Counselling; Debt Adjustment or adjusting (but not debt management) (amended 21/3/17)

It matters now what you actually do, because the providers will not accept partners in B2L/ 2nd Charge without these permissions. You also need to amend your KFI (from MCOB TP 1.1.45 and 46) from 21st March to include information on the new seven day right of reflection and, where the interest rate is variable, information on the Annual Percentage Rate of Charge (APRC) and the borrowing rate (including warnings about the variability of these rates).

What do IFAs and mortgage brokers need to do by March for the MCD to ensure compliance with FCA rules There are two strands. Buy to Let and second charge. Buy to Let: log into connect. As long as you currently hold “Full Mortgage” permissions, then the only immediate action will be for the “Firm” to complete a questionnaire via “Connect” on the FCA website which specifically asks whether you are going to be providing advice on “Consumer Buy To let Business”. You will be requested by FCA to do this.


Second Charge: Any Firm that currently holds Full Mortgage permissions will automatically be covered to provide advice on 2nd charge / Mortgage options post 21/03/2016. However you need to check that your Consumer Credit Licence has the correct categories required for the business that you conduct / could get involved in, and the recommendation is for these three set out below. If you don't have them, then IFAC will apply for you.

This ensures that any conversations that you have in relation to “paying off debts” or “rescheduling of commitments” as part of the advice process is covered / permitted. The three permissions that all IFA and mortgage broker firms need are these:

  • Credit Broking (required anyway for all mortgage brokers);
  • Debt Counselling; Debt Adjustment (but not debt management)
  • Second Charge: Your terms of business should be amended / adapted to take into account the options of 2nd Charge Mortgages / Lending. IFAC will advise you closer to the day.

The new rules actually require firms to issue a European Standardised Information Sheet (ESIS), a mandatory product disclosure document that is replacing the Key Facts Illustration (KFI). But this doesn't happen until March 2019. From 21st March then the additional mandatory information required on the KFI is (from MCOB TP 1.1.45 and 46) information on the new seven day right of reflection where the interest rate is variable, information on the Annual Percentage Rate of Charge (APRC) and the borrowing rate (including warnings about the variability of these rates).

confuzzled?

You are not alone and so is most of the industry, but, by painful experience IFAC know the answers. give us a call to find out.


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