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CONC 3.6 Financial promotions about credit agreements secured on land

Application

CONC 3.6.1R

This section applies:

  1. (1)

    to a financial promotion in relation to consumer credit lending in relation to regulated credit agreements secured on land; and

  2. (2)

    to a financial promotion in relation to credit broking in relation to regulated credit agreements secured on land;

and in both cases other than financial promotions to the extent that they relate to qualifying credit.

Definitions

CONC 3.6.2R

In this section, for a financial promotion relating to credit to be provided under a credit agreement “relevant date” means:

  1. (1)

    in a case where a date is specified in or determinable under the agreement at the date of its making as that on which the customer is entitled to require provision of anything the subject of the agreement, the earliest such date; and

  2. (2)

    in any other case, the date of the making of the agreement.

Prohibition on financial promotion where goods etc not sold for cash

CONC 3.6.3R

A financial promotion must not be communicated where it indicates a firm is willing to provide credit under a regulated restricted-use credit agreement secured on land relating to goods or services to be supplied by any person, when at the time the financial promotion is communicated, the firm or any supplier under such an agreement does not hold itself out as prepared to sell the goods or provide the services (as the case may be) for cash.

[Note: section 45 of CCA]

Content of financial promotions

CONC 3.6.4R
  1. (1)

    Where a financial promotion includes any of the amounts referred to in (5) to (7) of CONC 3.6.10 R the promotion must:

    1. (a)

      include all the other items of information (other than any item inapplicable to the particular case) listed in CONC 3.6.10 R; and

    2. (b)

      specify a postal address at which the person making the promotion may be contacted, except in the case of a financial promotion:

      1. (i)

        communicated by means of television or radio broadcast;

      2. (ii)

        in any form on the premises of a lender or dealer (other than a financial promotion in writing which customers are intended to take away);

      3. (iii)

        which includes the name and address of a dealer; or

      4. (iv)

        which includes the name and a postal address of a credit broker.

        [Note: regulation 4(1) of CCAR 2004]

  2. (2)

    The items of information listed in CONC 3.6.10 R must be given equal prominence and must be shown together as a whole.

    [Note: regulation 4(2) of CCAR 2004]

  3. (3)

    Any information in any book, catalogue, leaflet or other document which is likely to vary from time to time must be taken for the purpose of (2) to be shown together as a whole if:

    1. (a)

      it is set out together as a whole in a separate document issued with the book, catalogue, leaflet or other document;

    2. (b)

      the other information in the financial promotion is shown together as a whole in the book, catalogue, leaflet or other document; and

    3. (c)

      the book, catalogue, leaflet or other document identifies the separate document in which the information likely to vary is set out.

    [Note: regulation 4(3) of CCAR 2004]

Statements in relation to security

CONC 3.6.5R
  1. (1)

    Where a financial promotion concerns a facility for which security is or may be required, the promotion must:

    1. (a)

      state that security is or may be required; and

    2. (b)

      specify the nature of the security.

      [Note: regulation 7(1) of CCAR 2004]

  2. (2)

    Where, in the case of a financial promotion, the security comprises or may comprise a mortgage or charge on a property used by the customer as a dwelling (whether or not the customer’s primary residence)4:

    1. (a)

      except where (c) applies, the financial promotion must contain a warning in the form:

      “YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT”;

    2. (b)

      where the financial promotion indicates that credit is available for the payment of debts due to other lenders, the warning in (a) must be preceded by the words:

      “THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.”

    3. (c)

      where the credit agreement is or would be an agreement of a kind described in (3), the financial promotion must contain a warning in the form:

      “CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE”.

      [Note: regulation 7(2) of CCAR 2004]

  3. (3)

    The kinds of agreement in (2)(c) are:

    1. (a)

      any credit agreement under which no instalment repayments secured by the mortgage on the customer's home, and no payment of interest on the credit (other than interest charged when all or part of the credit is repaid voluntarily by the customer), are due or capable of becoming due while the customer continues to occupy the mortgaged land as the customer's main residence; and

    2. (b)

      any credit agreement:

      1. (i)

        which is secured by a mortgage which the lender cannot enforce by taking possession of or selling (or concurring with any other person in selling) the mortgaged land or any part of it while the customer continues to occupy it as the customer's main residence; and

      2. (ii)

        under which, although interest payments may become due, no full or partial repayment of the credit secured by the mortgage is due or capable of becoming due while the customer continues to occupy the mortgaged land as the customer's main residence.

        [Note: regulation 7(3) of CCAR 2004]

  4. (4)

    Where a financial promotion is for a mortgage or other loan secured on property and repayments are to be made in a currency other than sterling, the financial promotion must contain a warning in the form:

    “CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT”.

    [Note: regulation 7(4) of CCAR 2004]

  5. (5)

    The warnings provided for in (2) and (4):

    1. (a)

      must be given greater prominence in a financial promotion than is given to:

      1. (i)

        any rate of charge other than the typical APR; and

      2. (ii)

        any indication or incentive of a kind referred to in CONC 3.6.6R (1); and

    2. (b)

      must be given no less prominence in a financial promotion than is given to any of the items listed in CONC 3.6.10 R that appear in the financial promotion.

      [Note: regulation 7(6) of CCAR 2004]

  6. (6)

    Paragraphs (2), (3), (4) and (5) do not apply in the case of a financial promotion which:

    1. (a)

      is communicated by means of television or radio broadcast in the course of programming the primary purpose of which is not financial promotion; or

    2. (b)

      is communicated by exhibition of a film (other than exhibition by television broadcast); or

    3. (c)

      contains only the name of the firm communicating the financial promotion.

      [Note: regulation 7(8) of CCAR 2004]

Annual percentage rate of charge

CONC 3.6.6R
  1. (1)

    A financial promotion must specify the typical APR if the promotion:

    1. (a)

      specifies any other rate of charge;

    2. (b)

      includes any of the items of information listed in CONC 3.6.10R (5) to (7);

    3. (c)

      indicates in any way, whether expressly or by implication,3 including by means of the name given to a business or of an address used by a business for the purposes of electronic communication, that:

      1. (i)

        credit is available to persons who might otherwise consider their access to credit restricted; or

      2. (ii)

        any of the terms on which credit is available is more favourable (either for a limited period or generally) than corresponding terms applied in any other case or by any otherlender;3 or

        3
      3. (iii)

        the way in which the credit is offered is more favourable (either for a limited period or generally) than corresponding ways used in any other case or by any otherlender;3 or

        3
    4. (d)

      includes any incentive (including but not limited to, gifts, special offers, discounts and rewards) to apply for credit or to enter into an agreement under which credit is provided;

      [Note: regulation 8(1) of CCAR 2004]

    5. (e)

      includes an incentive (in the form of a statement about the speed or ease of, processing, considering or granting an application or of making funds available) to apply for credit or to enter into an agreement under which credit is provided.

  2. (2)

    A financial promotion may not indicate the range of APRs charged where credit is provided otherwise than by specifying, with equal prominence, both:

    1. (a)

      the APR which the firm communicating or approving the financial promotion reasonably expects, at the date on which the promotion is communicated or approved, would be the lowest APR at which credit would be provided under not less than 10% of the agreements which will be entered into as a result of that promotion; and

    2. (b)

      the APR which the firm communicating or approving the financial promotion reasonably expects, at that date, would be the highest APR at which credit would be provided under any of the agreements which will be entered into as a result of that promotion.

      [Note: regulation 8(2) of CCAR 2004]

  3. (3)

    An APR must be shown as “%APR”.

    [Note: regulation 8(3) of CCAR 2004]

  4. (4)

    Where an APR is subject to change it must be accompanied by the word “variable”.

    [Note: regulation 8(4) of CCAR 2004]

  5. (5)

    The typical APR in a financial promotion must be:

    1. (a)

      accompanied by the word “typical”;

    2. (b)

      presented together with any of the items listed in CONC 3.6.10 R that are included in the promotion;

    3. (c)

      given greater prominence in the promotion than:

      1. (i)

        any other rate of charge;

      2. (ii)

        any items listed in CONC 3.6.10 R; and

      3. (iii)

        any indication or incentive of a kind referred to in (1); and

    4. (d)

      in the case of a promotion in printed or electronic form which includes any of the items listed in CONC 3.6.10 R, shown in characters at least one and a half times the size of the characters in which those items appear.

      [Note: regulation 8(5) of CCAR 2004]

  6. (6)

    In the case of a financial promotion relating to a borrower-lender agreement enabling the customer to overdraw on a current account under which the lender is the Bank of England or an authorised person4 with permission4 to accept deposits, there may be substituted for the typical APR a reference to the statement of:

    1. (a)

      a rate, expressed to be a rate of interest, being a rate determined as the rate of the total charge for credit calculated on the assumption that only interest is included in the total charge for credit, and

    2. (b)

      the nature and amount of any other charge included in the total charge for credit.

      [Note: regulation 8(6) of CCAR 2004]

CONC 3.6.7G

Whether or not a reference to speed or ease in CONC 3.6.6R (1)(e) constitutes an incentive to apply for credit or enter into an agreement under which credit is provided would depend upon the circumstances, including whether it is likely to persuade or influence a customer to take those steps or is merely a factual statement about the product or service.

Restricted expressions

CONC 3.6.8R
  1. (1)

    A financial promotion must not include:

    1. (a)

      the word “overdraft” or any similar expression as describing any agreement for running-account credit, except where the agreement enables a customer to overdraw on a current account;

    2. (b)

      the expression “interest free” or any similar expression indicating that a customer is liable to pay no greater amount in respect of a transaction financed by credit than he would be liable to pay as a cash purchaser for the like transaction, except where the total amount payable by the customer does not exceed the cash price;

    3. (c)

      the expression “no deposit” or any similar expression, except where no advance payments are to be made;

    4. (d)

      the expression “loan guaranteed” or “pre-approved” or “no credit checks” or any similar expression, except where the agreement is free of any conditions regarding the credit status of the customer;

    5. (e)

      the expression “gift”, “present” or any similar expression, except where there are no conditions which would require the customer to repay the credit or return the item that is the subject of the claim.

    [Note: regulation 9 of CCAR 2004]

  2. (2)

    A financial promotion must not include for a repayment of credit the expression “weekly equivalent” or any expression to like effect or any expression of any other periodical equivalent, unless weekly repayments or the other periodical payments are provided for under the agreement.

  3. (3)

    In this rule “cash purchaser” means a person2 who for money consideration acquires goods, land or other things or is provided with services, under a transaction which is not financed by credit.

    2

Total charge for credit and any APR: assumptions about running account credit

CONC 3.6.9R
  1. (1)

    In the case of a financial promotion about running-account credit, the following assumptions have effect for the purpose of calculating the total charge for credit and any APR, notwithstanding the terms of the transaction advertised and in place of any assumptions in CONC App 1.1.11 R to CONC App 1.1.18 R that might otherwise apply:

    1. (a)

      the amount of the credit to be provided must be taken to be £1,500 or, in a case where credit is to be provided subject to a credit limit of less than £1,500, an amount equal to that limit;

    2. (b)

      it must be assumed that the credit is provided for a period of one year beginning with the relevant date;

    3. (c)

      it must be assumed that the credit is provided in full on the relevant date;

    4. (d)

      where the rate of interest will change at a time provided in the transaction within a period of three years beginning with the relevant date, the rate must be taken to be the highest rate at any time obtaining under the transaction in that period;

    5. (e)

      where the agreement provides credit to finance the purchase of goods, services, land or other things and also provides one or more of:

      1. (i)

        cash loans;1

      2. (ii)

        credit to refinance existing indebtedness of the customer, whether to the lender or another person; and

      3. (iii)

        credit for any other purpose;

      and either or both different rates of interest and different charges are payable for the credit provided for all or some of these purposes, it must be assumed that the rate of interest and charges payable for the whole of the credit are those applicable to the provision of credit for the purchase of goods, services, land or other things; and

    6. (f)

      it must be assumed that the credit is repaid:

      1. (i)

        in twelve equal instalments; and

      2. (ii)

        at monthly intervals, beginning one month after the relevant date.

        [Note: paragraph 1 of schedule 1 to CCAR 2004]

Total charge for credit and any APR: tolerances in disclosure of an APR

  1. (2)

    For the purposes of CONC 3.6, it is sufficient compliance with the requirement to show an APR if there is included in the financial promotion:

    1. (a)

      a rate which exceeds the APR by not more than one; or

    2. (b)

      a rate which falls short of the APR by not more than 0.1;

    or in a case to which (3) or (4) applies, a rate determined in accordance with those sub-paragraphs or whichever of them applies to that case.

    [Note: paragraph 2 of schedule 1 to CCAR 2004]

Total charge for credit and any APR: tolerance where repayments are nearly equal

  1. (3)

    In the case of an agreement under which all repayments but one are equal and that one repayment does not differ from any other repayment by more whole pence than there are repayments of credit, there may be included in a financial promotion about the agreement a rate found under CONC App 1.1.9 R as if that one repayment were equal to the other repayments to be made under the agreement.

    [Note: paragraph 3 of schedule 1 to CCAR 2004]

Total charge for credit and any APR: tolerance of interval between relevant date and first repayment

  1. (4)

    In the case of an agreement under which:

    1. (a)

      three or more repayments are to be made at equal intervals; and

    2. (b)

      the interval between the relevant date and the first repayment is greater than the interval between the repayments;

    a financial promotion about the agreement may include a rate found under CONC App 1.1.9 R as if the interval between the relevant date and the first repayment were shortened so as to be equal to the interval between repayments.

    [Note: paragraph 4 of schedule 1 to CCAR 2004]

Information that CONC 3.6.4R(1) may require to be included in a financial promotion4

CONC 3.6.10R
  1. (1)

    The amount of credit which may be provided under a credit agreement or an indication of one or both of the maximum amount and the minimum amount of credit which may be provided.

    [Note: paragraph 1 of schedule 2 to CCAR 2004]

Deposit of money in an account

  1. (2)

    A statement of any requirement to place on deposit any sum of money in any account with any person.

    [Note: paragraph 2 of schedule 2 to CCAR 2004]

Cash price

  1. (3)

    In the case of a financial promotion about credit to be provided under a borrower-lender-supplier agreement, where the financial promotion specifies goods, services, land or other things having a particular cash price, the acquisition of which from an identified dealer may be financed by the credit, the cash price of such goods, services, land or other things.

[Note: paragraph 3 of schedule 2 to CCAR 2004]

Advance payment

  1. (4)

    A statement as to whether an advance payment is required and, if so, the amount or minimum amount of the payment expressed as a sum of money or a percentage.

    [Note: paragraph 4 of schedule 2 to CCAR 2004]

Frequency, number and amount of repayments of credit

  1. (5)
    1. (a)

      In the case of a financial promotion about running-account credit, a statement of the frequency of the repayments of credit under the transaction and of the amount of each repayment stating whether it is a fixed or minimum amount, or a statement indicating the manner in which the amount will be determined.

    2. (b)

      In the case of other financial promotions, a statement of the frequency, number and amounts of repayments of credit.

    3. (c)

      The amount of any repayment under this sub-paragraph may be expressed as a sum of money or as a specified proportion of a specified amount (including the amount outstanding from time to time).

      [Note: paragraph 5 of schedule 2 to CCAR 2004]

    Other payments and charges

  2. (6)
    1. (a)

      Subject to (b) and (c), a statement indicating the description and amount of any other payments and charges which may be payable under the agreement promoted in the financial promotion.

    2. (b)

      Where the liability of the customer to make any payment cannot be ascertained at the date the financial promotion is communicated, a statement indicating the description of the payment in question and the circumstances in which the liability to make it will arise.

    3. (c)

      Paragraphs (a) and (b) do not apply to any charge payable under the transaction to the lender or any other person on behalf of the lender upon failure by the customer or a relative of the customer to do or refrain from doing anything which the customer is required to do or refrain from doing, as the case may be.

      [Note: paragraph 6 of schedule 2 to CCAR 2004]

    Total amount payable by the customer

  3. (7)

    In the case of a financial promotion about fixed-sum credit to be provided under a credit agreement which is repayable at specified intervals or in specified amounts and other than cases under which the sum of the payments within (a) to (c) is not greater than the cash price referred to in (3), the total amount payable, being the total of:

    1. (a)

      advance payments;

    2. (b)

      the amount of credit repayable by the customer, and

    3. (c)

      the amount of the total charge for credit.

    [Note: paragraph 7 of schedule 2 to CCAR 2004]