On 15 January, the FCA published a consultation paper (CP16/2) on minor changes to its rules and guidance in respect of the UK implementation of the Mortgage Credit Directive (2014/17/EU) (MCD). The consultation paper sets out various legislative and regulatory changes that will need to be made in order to finalise the MCD. The draft rules are set out in the Mortgage Credit (Amendment) Instrument 2016 in appendix 1 to the consultation paper. The key changes include certain amendments to the FCA Handbook.
1. MCOB 4.4A on the initial disclosure requirements to align it with the MCD
Given the extensive nature of existing UK mortgage regulation, the FCA's approach to implementing the MCD has been to rely on existing rules wherever possible, and not to extend any new requirements beyond the scope set out in the Directive. The FCA became aware that the amendments to MCOB 4.4A published in its policy statement in March 2015 (PS 15/9) go beyond those in the MCD, by applying the MCD initial disclosure requirements to all firms, regardless of the service they are providing. The FCA notes that this would have an unintended consequence as it would have reintroduced a durable medium disclosure requirement for lenders, where the FCA has previously concluded that oral disclosure is likely to be more effective. Therefore, these amendments are to rectify that position, to ensure that the MCD initial disclosure rules do not apply more widely than required by the MCD. Consequential changes to the guidance on when the MCD requires advisers to make their initial disclosure will also be made. As a result, while the requirement to provide information remains, unless firms are acting as a MCD mortgage adviser or a MCD mortgage credit intermediary, the relevant information can be provided orally and need not be in a durable medium.
2. MCOB transitional provisions on 'topped up' key facts illustration (KFI)
An amendment is proposed to include a requirement to provide in the 'topped up' KFI the monthly payments figure should interest rates rise to a 20-year high. This requirement was set out in the FCA's original MCD consultation paper published in September 2014 (CP14/20), but was inadvertently omitted from the rules.
3. What's next
The closing date for responses to this consultation paper is 15 February 2016. In early 2016, the FCA is due to consult on how its knowledge and competence requirements will apply to firms pass-porting into the UK under the MCD, and on the forms for notifying an intention to passport.
The FCA intends to publish feedback, together with the final rules, in a policy statement in the March 2016 Handbook Notice, in time for the 21 March 2016 deadline for the UK to transpose the MCD, at which point regulation of second charge mortgages transfers from the FCA's consumer credit regime to its mortgage regime.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
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