MCOB 4.10 1Home purchase plans: sales standards3
Scope of service provided
Initial disclosure requirements1
[deleted]3
3A firm must comply with the rules in MCOB 4.4A as if the references in those rules to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers.
3For the purposes of MCOB 4.4A.2R (1) there is one relevant market for home purchase plans.
1The guidance on initial disclosure requirements in MCOB 4.4A3 may be relevant; in this context, that guidance should be read using home purchase plan terminology instead of the equivalent regulated mortgage contract terminology, where appropriate3.
Additional requirements for distance home purchase mediation contracts with retail customers
Note: The rules regarding additional disclosure requirements for, and cancellation of, distance home purchase mediation contracts are set out in MCOB 4.5 and MCOB 4.6 respectively.
3Advised sales: suitability
3If a firm gives advice to a particular customer to enter into a home purchase plan, or to vary an existing home purchase plan, it must take reasonable steps to ensure that the home purchase plan is, or after the variation will be, suitable for that customer.
3In MCOB 4.10, a reference to advice to enter into a home purchase plan is to be read as including advice to vary an existing home purchase plan.
3A firm should take reasonable steps to obtain from a customer all information likely to be relevant for the purposes of MCOB 4.10.5A R to MCOB 4.10.9A R.
3For the purposes of MCOB 4.10.5A R:
- (1)
a home purchase plan will not be suitable for a customer unless the home purchase plan is appropriate to the needs and circumstances of the customer;
- (2)
a firm must base its determination of whether a home purchase plan is appropriate to a customer's needs and circumstances on the facts disclosed by the customer and other relevant facts about the customer of which the firm is or should reasonably be aware;
- (3)
no advice must be given to a customer to enter into a home purchase plan if there is no home purchase plan which is suitable from the product range offered by the firm;
- (4)
if a home purchase provider is dealing with an existing customer in arrears, with a payment shortfall or otherwise in breach of their home purchase plan and has concluded that there is no suitable replacement home purchase plan, the firm must nonetheless have regard to MCOB 13.3; and
- (5)
the reasonable steps in that rule include considering why it is not appropriate for the customer to take out a regulated mortgage contract.
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3MCOB 4.10.5DR (3) has the effect that a firm cannot recommend the 'least worst' home purchase plan where the firm does not have access to home purchase plan products appropriate to the customer's needs and circumstances.
3Firms may wish to consider the following provisions:
3- (1)
the rule at MCOB 4.7A.6 R on the customer's needs and circumstances, as if it were guidance and to the extent applicable to home purchase plans; and
- (2)
the guidance at MCOB 4.7A.1G (2), MCOB 4.7A.21 G and MCOB 4.7A.23 G (Other considerations when advising);
in each case using home purchase plan terminology instead of the equivalent regulated mortgage contract terminology, where appropriate.
Rejected recommendations
3If a customer has rejected the advice given by a firm and instead requested an execution-only sale of a home purchase plan, the firm may enter into or arrange that execution-only sale provided the requirements in MCOB 4.8A.14 R (as applied in relation to home purchase plans by MCOB 4.10.9B R and modified for home purchase plans by MCOB 4.10.9D R) are satisfied.
Execution-only sales
MCOB 4.8A applies to a firm as if the references in that section to regulated mortgage contracts and mortgage lenders were to, respectively, home purchase plans and home purchase providers, but MCOB 4.8A.14R (1) and (2) are modified in relation to home purchase plans as set out in MCOB 4.10.9D R.
As provided in MCOB 4.1.2B R, MCOB 4.8A only applies to home purchase providers in relation to entering into home purchase plans where there is no firm which is arranging the transaction and to which MCOB 4.8A applies.
For home purchase plans, the following items of information replace those set out in MCOB 4.8A.14R (1) and (2):
- (1)
the name of the home purchase provider;
- (2)
the length of the term required by the customer; and
- (3)
the sum required from the home purchase provider.
Risks and features statement and tariff of charges
1A risks and features statement need not be personalised to the customer's circumstances but must:
- (1)
include the Key facts logo in a prominent position at the top of the statement;
- (2)
state that the FCA requires a firm to provide the statement;
- (3)
state that mortgages are available and that the customer should think carefully about the product appropriate to his needs;
- (4)
describe the significant features of the plan, including:
- (a)
how the home purchase plan works;
- (b)
the nature of the customer's commitment;
- (c)
when and how a customer's commitment is reviewed;
- (d)
any significant restrictions of the plan; and
- (e)
the charges that a customer may incur under the plan, including the reason for, and amount of, each charge, when they are payable, whether they will be reimbursed and, if so, when;
- (a)
- (5)
describe the risks associated with the plan, including:
- (a)
the risks to the customer if he fails to keep up repayments and the circumstances in which this might occur; and
- (b)
risks to the customer of the home purchase provider failing or disposing of any of its obligations or rights (including its interest in the property) to a third party (taking into account steps that will be taken by the home purchase provider to mitigate such risks); and
- (a)
- (6)
state the importance of obtaining independent legal advice.
1A firm may omit details of the charges that a customer may incur under a home purchase plan from the risks and features statement if they are included in a separate tariff of charges provided to the customer at the same time.
Record keeping
- (1)
3A firm must make and retain a record:
- (a)
of the customer information, including that relating to the customer's needs and circumstances that it has obtained for the purposes of MCOB 4.10.5D R;
- (b)
that explains why the firm has concluded that any advice given to a customer complies with MCOB 4.10.5A R and satisfies the suitability requirement in MCOB 4.10.5DR (1); and
- (c)
of any advice which the customer has rejected, including the reasons why it was rejected and details of the home purchase plan which the customer has proceeded with as an execution-only sale.
- (a)
- (2)
The records in (1) must be retained for a minimum of three years from the date on which the advice was given.
3Firms should note the record-keeping requirements in MCOB 4.8A in relation to execution-only sales which are imposed in relation to home purchase plans by MCOB 4.10.9B R.