The FCA has published a consultation paper (CP16/2) on minor changes to its rules and guidance in the light of the Mortgage Credit Directive (2014/17/EU) (MCD).
In the consultation paper, the FCA explains that the government intends to lay down draft legislation that will make amendments to legislation including the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544).
In particular, these amendments clarify that where a credit agreement or consumer hire agreement was regulated under the Consumer Credit Act (CCA) before 1 April 2014, it will remain regulated regardless of whether legislative amendments have introduced exemptions for new agreements, and consumers will continue to have the same rights and protections under the CCA and FCA’s consumer credit regime in relation to those agreements. In addition, the proposals ensure that housing associations’ back book of second charge mortgages (unlike other back book second charge mortgages) will not transfer into the new mortgages regime, so will not be subject to MCD-related provisions.
If the legislation is made and comes into force as anticipated, the FCA will need to make changes to its Perimeter Guidance Manual (PERG) and the Handbook Glossary. It is consulting on these changes now, so they can be made before 21 March 2016 when the MCD comes into force. However, it may need to review its proposals once the relevant legislative amendments have been made.
The FCA also proposes some minor changes to its Mortgage and Home Finance: Conduct of Business Sourcebook (MCOB) to implement the MCD. It proposes amendments to MCOB 4.4A on initial disclosure to align more directly with the MCD and also to the MCOB transitional provisions for the ‘topped up’ Key Facts Illustration to ensure the inclusion of the monthly payments figure should interest rates rise to a 20-year high.
The closing date for responses is 15 February 2016. The FCA intends to publish feedback, together with final rules, in a policy statement in the March 2016 Handbook Notice.