PS15/20: Implementation of the Mortgage Credit Directive: Consequential Changes to the Consumer Credit Sourcebook (CONC)

In this Policy Statement we report on the main issues arising from the MCD elements of Consultation Paper 15/6 (Consumer credit – proposed changes to our rules and guidance) and publish the final rules.

Why are we issuing this Policy Statement?

In February 2015 we published CP15/6: Consumer credit - proposed changes to our rules and guidance, which set out proposed amendments to our Consumer Credit sourcebook (CONC) to implement the Mortgage Credit Directive (MCD).

In this Policy Statement we summarise the feedback we received on the MCD elements of the consultation and our response. In general, respondents agreed with our proposed amendments and we are publishing final rules, the majority of which come into effect on 21 March 2016. Our response to the non-MCD changes to CONC we consulted on in CP15/6 will be published later this year.

Policy Statement 15/20 [PDF]

Who does this affect?

This Policy Statement will primarily interest

  • authorised firms carrying out regulated activities currently captured by our consumer credit rules
  • firms involved with niche forms of lending for the purchase or retention of property (or rights in property) which is not secured by a regulated mortgage contract

Some consumers may be affected, such as those with a first charge mortgage less than £25,000 entered into prior to 31st October 2004 which is currently subject to the Consumer Credit Act 1974 (“CCA”) (“first charge CCA mortgages”) or those seeking an MCD loan not secured on the home.

What are the next steps?

Firms involved in lending that is currently subject to CONC, but which will be subject to MCOB from 21 March 2016, will need to consider how these changes affect them. Virtually all agreements secured on land will now be subject to MCOB, and affected firms should consider how our new rules apply to their business and implement the changes necessary to comply within the appropriate deadlines.

Firms who currently hold an interim permission for credit-related regulated activity in relation to second charge mortgages will need to apply for the appropriate mortgage permission(s) if they wish to continue with this activity after 21 March 2016. Authorised firms will need to apply for a variation of permissions to add relevant mortgage permissions if not already held. Firms should apply in good time before 21 March 2016 to enable us to consider and determine the application.

Firms conducting activities relating to MCD lending not secured on the home will require consumer credit permissions and may need to apply for the new permission of advising on MCD lending not secured on the home if they are providing advice on such loans.

What will we do?

In September we will consult on minor changes to the Handbook to address outstanding issues relating to MCD lending not secured on the home, including whether to amend the definition of "credit related regulated activity" to include the activity of advising borrowers in respect of this type of lending and whether to apply the cancellation rights in CONC 11.

Later in the year we will consult on the further changes needed as a result of the Government’s decision to make the administration of first charge CCA mortgages a regulated mortgage activity.

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