The Financial Conduct Authority is proposing amendments to its handbook to limit the changes being made to initial disclosure requirements to those which are required by Mortgage Credit Directive, due to come into force in March.
The European Union rules impose certain initial disclosure requirements on credit intermediaries and in relation to advisory services.
“It has been brought to our attention that those revisions go beyond the changes required by the Mortgage Credit Directive,” stated the regulator, adding “that was not our policy intention and we are taking this opportunity to correct the rules”.
The FCA’s latest consultation on certain minor changes ahead of the Mortgage Credit Directive’s adoption in the UK is in part to remove the obligation on lenders to provide information in a “durable medium” to customers on any limitations in the range of products it offers and the basis on which it will be remunerated.
It noted the changes will not remove the obligation to provide the information, merely the obligation to provide it in a durable medium.
Mortgage lenders will remain subject to the initial disclosure requirements that exist at present - to provide appropriate consumer protection, except where they are acting as an MCD mortgage adviser or an MCD mortgage credit intermediary - when the requirement to provide initial disclosure in a durable medium will apply.
The FCA added it is also amending the related guidance to ensure it reflects the amended rules, taking the opportunity to clarify when the Mortgage Credit Directive requires advisers to make their initial disclosure.
The consultation document, published on Friday (15 January), also noted the FCA previously stated firms choosing to provide a ‘topped up’ version of the KFI disclosure document instead of the European Standardised Information Sheet would need to provide information for consumers on the potential impact of interest rate changes.
“However the transitional provision, which is due to come into force on 21 March 2016, inadvertently omitted the requirement for the monthly payment amount.”
Therefore, the regulator is proposing to amend the transitional provision to accurately reflect the intention to provide fuller information on interest rate impact.
The consultation will close in one month’s time, in order to ensure the Handbook is aligned with the legislative framework as of 21 March.
“Housing associations in particular will need to assess whether they hold, or should hold, permission for the regulated activity of exercising or having the right to exercise the lender’s rights and duties under a regulated credit agreement for in relation to their back book of second charge mortgage loans entered into before 1 April 2014,” the paper added.
A summary of consultation feedback will be published in the FCA’s March Handbook notice.
The Council of Mortgage Lenders stated that it was seeking views from members and will respond to the consultation, adding that it recognises the reasons for the amendments. “We understand that the FCA acknowledges the relatively tight timeframe for lenders’ systems changes to reflect these late amendments.”
peter.walker@ft.com
