MCOB 5.4 Illustrations: general

A firm must be able to show that it has taken reasonable steps to ensure that any illustration it issues is clear, fair and not misleading.

An illustration on a particular regulated mortgage contract issued by, or on behalf of, a mortgage lender, must be an accurate reflection of the costs of the regulated mortgage contract.

A mortgage intermediary must take reasonable steps to ensure that an illustration which it issues, or which is issued on its behalf, other than that provided by a mortgage lender:

1. (1)

   is accurate within the following tolerances:

   1. (a)

      no more than one percent or £1, whichever is the greater, below the actual figures charged by the mortgage lender for the following:

      1. (i)

         the total amount payable in Section 5 of the illustration;

      2. (ii)

         the amount payable for every £1 borrowed in Section 5 of the illustration;

      3. (iii)

         the amounts that the customer must pay by regular instalment in Section 6 of the illustration (or in Section 7 of the illustration for an interest rate with a floor or a ceiling); and

      4. (iv)

         the amount by which the regular instalment (or the total amount payable for loans without a term or a regular repayment plan) would increase following a one percentage point increase in interest rates in Section 7;1

   2. (b)

      the APR in Section 5 of the illustration cannot be understated by more than 0.1%; and]

2. (2)

   except in the case of conveyancing fees and insurance premiums (where estimates may be used), is accurate in respect of other figures quoted in the illustration including fees payable to the mortgage lender or mortgage intermediary in Section 8 of the illustration and cash examples of early repayment charges, calculated in accordance with the rules in MCOB 5.6.84 R to MCOB 5.6.88 R, in Section 10.1

A firm must not issue an illustration to a customer for a regulated mortgage contract for which the customer is clearly ineligible on the basis of the information that the firm has obtained from the customer or the mortgage lender's lending criteria.

In providing an illustration to a customer, a firm must explain to the customer the importance of reading the illustration and understanding it.

Any illustration provided to a customer by a firm must be in a durable medium.

A firm must not provide a customer with information that is specific to the amount that the customer wants to borrow on a particular regulated mortgage contract except in the following circumstances:

1. (1)

   when it is in the form of an illustration;

2. (2)

   when it is provided on screen, for example a computer screen;

3. (3)

   when supplementary information which is not contained within an illustration is provided after or at the same time as an illustration; or

4. (4)

   when it is provided orally, for example by telephone.

Where MCOB 5.4.13 R(2) applies:

1. (1)

   if the customer initiates the accessing of quotation information on screen (for example, by using the internet or interactive television), the following warning must be displayed prominently on each page on screen:'This information does not contain all of the details you need to choose a mortgage. Make sure that you read the separate key facts illustration before you make a decision.'; and

2. (2)

   a firm must not provide a customised print function where the information on the screen would not be in the form of an illustration if the information were printed in hard copy.

Where MCOB 5.4.13 R(3) applies, supplementary information must only be provided when it does not significantly duplicate information provided in the illustration.

1. (1)

   Unless (2) applies, where MCOB 5.4.13 R(2) or MCOB 5.4.13 R(4) apply, a firm must provide the means for the customer to obtain an illustration as soon as practicable, through a delivery channel acceptable to the customer.

2. (2)

   A firm does not need to provide an illustration if the customer refuses to disclose key information (for example, in a telephone conversation, his name or a communication address) or where the provision of an illustration is not appropriate, for example, because on the basis of discussions undertaken the customer is ineligible given the mortgage lender's lending criteria, or is not interested in pursuing the enquiry.

A firm must make an adequate record of each illustration that it issues to a customer in accordance with MCOB 5.5.1 R where the customer applies for that particular regulated mortgage contract.

The record required by MCOB 5.4.19 R must be retained for a year from the date of the application made by the customer.

Where the illustration provided to the customer does not contain an accurate quotation or a reasonable estimate of the payments the customer will need to make in connection with any tied product that the customer must take out with the regulated mortgage contract, and the customer applies for that regulated mortgage contract:

1. (1)

   the firm must provide the customer with an accurate quotation as soon as possible after he has applied, and in good time before the offer document is provided;

2. (2)

   the customer has a right to withdraw his application for the regulated mortgage contract for a period of seven days from receipt of the quotation referred to in (1);

3. (3)

   the quotation for the tied product must be accompanied by a notice explaining that the customer can withdraw his application and receive a full refund of any fees paid in connection with the application for that regulated mortgage contract (excluding any fees paid in respect of the regulated activity of arranging or advising on a regulated mortgage contract by a mortgage lender or a mortgage intermediary) for a period of seven days from receipt of the quotation or acceptance of the mortgage lender's offer if sooner; and

4. (4)

   the firm must refund any fees paid by the customer (excluding any fees paid in respect of any advice provided by a mortgage lender or a mortgage intermediary) if the customer decides to exercise his right to withdraw his application in accordance with (2).