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Financial Promotion Statement Templates

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21.11 Pre-Contractual Requirements

The company understands that prior to entering in to regulated credit agreements with a customer, we must ensure that all regulatory requirement have been complied with. To enable us to do this and to monitor the continued complaints of staff in relation to all consumer credit agreements, we use a Pre-Contractual Checklist which is completed in all cases and is filed with the customer’s agreement details and retained for the retention and regulatory defined period.

21.11.1 Pre-Contract Disclosure Policy

1. Policy Statement

The company are committed to ensuring that all credit agreements, repayments scheme and forms of lending are fair, appropriate and suitable for the customer. This policy sets out our aims and objectives for any pre-contract disclosures and obligations that we have as a company under our own duty of care responsibilities and the regulatory system.

To comply with the Consumer Credit Act and in accordance with the section 4 of the CONC sourcebook, as set out in the FCA Handbook, the company have developed and set objectives to be met with regards to disclosures prior to the completion of any credit agreement/repayment scheme. We have considered the principles of Treating Customers Fairly in all of our policies and understand that full disclosure and transparency is an essential business function.

This policy has also been created to provide guidance and support for our staff, to ensure that they treat customers fairly and only complete any contracts, agreements or repayments schemes when all of the pre-contract disclosures, regulations and our own objectives have been met and satisfied.

2. Purpose

The purpose of this policy is to provide clear guidance to our staff and to honour our duty of care obligations to customers, regarding pre-contract regulations and disclosures. This policy sets out our objectives and details how we intend to be compliant with CONC 4 of the FCA handbook.

The company provides staff training on the objectives and aims set out in this policy as well as the FCA requirements on pre-contract disclosures and any associated regulations, with the aim of ensuring that our staff understand their obligations and comply with any and all rules prior to, during and after any contractual agreement is put into place.

We are committed to providing all customers with a high level of service whilst remaining compliant with the legal, statutory and regulatory requirements. This includes honouring our obligations under the pre-contract disclosure section of the FCA handbook.

3. Scope

The policy relates to all staff (meaning permanent, fixed term, and temporary staff, any third-party representatives or sub-contractors, agency workers, volunteers, interns and agents engaged with the company in the UK or overseas) within the organisation and has been created to ensure that staff deal with the area that this policy relates to in accordance with legal, regulatory, contractual and business expectations and requirements.

4. What Are Pre-Contract Disclosures?

Pre-contract disclosures are a set of rules and regulations applicable under the Consumer Credit Act and detailed in CONC 4 of the FCA Handbook. They are the mandatory obligations of any lender, credit broker or firm who enters into a credit agreement or hire agreement with a consumer, of which the criteria must be satisfied prior to entering into the actual contract.

Pre-contract disclosures are applicable as soon as any lending/credit discussions take place with a consumer, which includes sales, financial promotions and providing quotes. The aim of these disclosures is to ensure that any consumer considering entering into a credit agreement, is aware of all the facts, figures and conditions of any such agreement, prior to becoming contractually obligated.

Transparency is the main focus of pre-contract disclosures, with an emphasis on the firm ensuring that the consumer is aware of their rights, any consequences of contractual failures and making sure that the product, service and/or agreement in question, is fit for purpose and applicable to the customer.

5. Objectives

The company has laid out the below objectives and aims which we intend to meet in relation to pre-contract disclosures, with regards to all customers.

[NOTE: Pre-contract disclosure regulations differ based on business type – please add/delete the below objectives and sections as applicable to your specific firm.]

The company will ensure that: –

  • All customer information and pre-contract disclosures adhere to and comply with The Consumer Credit (Disclosure of Information) Regulations 2010.
  • We adhere to and satisfy all the regulatory requirements for providing quotations, as set out in section 4 of the CONC sourcebook.
  • We provide all information to a customer, prior to any hire/credit agreement or contract being signed, with the exact facts, figures, explanations and highlighted consequences on; regardless of any adverse effects any such disclosure could have on this firm’s ability to complete the sale.
  • We provide transparent, clear and easy to understand information with regards to any quotes and/or credit/hire agreement.
  • We will provide the customer with several means of contacting us should they have any queries or wish to discuss any pre-contract disclosure information. Such means will include: –
    • Direct telephone numbers
    • Email addresses
    • Full postal address
    • Fax number
  • Any risks to the customer (e.g. repossession, enforcement, court orders etc) and/or any consequences of missed payments or underpayments are clearly described and highlighted.
  • Prior to setting up any regulated agreement, we always provide the customer with: –
    • the features of the agreement which may make the credit to be provided under the agreement unsuitable for particular types of use
    • how much the customer will have to pay periodically and, where the amount can be determined, in total under the agreement
    • the features of the agreement which may operate in a manner which would have a significant adverse effect on the customer in a way which the customer is unlikely to foresee
    • the principal consequences for the customer arising from a failure to make payments under the agreement at the times required by the agreement including, where applicable and depending upon the type and amount of credit and the circumstances of the customer:
      • the total cost of the debt growing
      • incurring any default charges or interest for late or missed payment or under-payment
      • impaired credit rating and its effect on future access to or cost of credit
      • legal proceedings, including reference to charging orders (or, in Scotland, inhibitions), and to the associated costs of such proceedings
      • repossession of the customer’s home or other property; and
      • where an article is taken in pawn, that the article might be sold, if not redeemed; and
    • The effect of the exercise of any right to withdraw from the agreement and how and when this right may be exercised.
    • Where the credit agreement relates to any high-cost, short-term credit, we always advise the customer that entering into that agreement would be unsuitable to support sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.

6. Quotations

For the purposes of this policy and to comply with all associated FCA regulations, the company defines the term “Quotation” to mean any document by which this firm or any staff member associated with this firm, gives an existing or potential customer information about the terms on which this firm or any affiliated lender or owner is prepared to do business, but it does not include: –

    • a communication which is also a financial promotion
    • any document given to a customer under section 58 of the CCA (opportunity for withdrawal from prospective land mortgage)
    • any document sent to a customer for signature which embodies the terms or such of them as it is intended to reduce to writing of a credit agreement or a consumer hire agreement; or
    • any copy of an unexecuted agreement delivered or sent to a customer under section 62 of the CCA (duty to supply copy of unexecuted agreement).
  • Where the words of a statement which must be included in a quotation are specified, the statement must be:
    • in capital letters
    • clear and legible; and
    • Prominent.
  • Providing a quotation includes making a quotation available temporarily.

In respect to any consumer credit lending or consumer hiring that the company offers, where any quote is provided in connection with a credit agreement that might be secured upon a customer’s home, we will always ensure that any such quotation includes a statement that such security would or might be required.

Where we provide any quote to a customer in connection with a prospective credit agreement, which would or might be secured upon their home, which is either classed as the customer’s main residence or one of the below clauses applies: –

a) no instalment repayments of the credit secured by a mortgage on the customer’s home and no payment of interest on the credit (other than interest charged when all or part of the credit is repaid voluntarily by the customer), are due or capable of becoming due; or

b) the lender cannot enforce the credit agreement by taking possession of or selling (or concurring with any other person in selling) the home or any part of it while the customer continues to occupy it as the customer’s main residence; and

c) where (b) applies, although interest payments may become due, no full or partial repayment of the credit secured by a mortgage is due or capable of becoming due.

the company will always adhere to the pre-contract disclosure regulations and include in the quote the below statement: –

“CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK INDEPENDENT ADVICE.”

Where the company provides a quotation to a customer in connection with a prospective credit agreement which would or might be secured on their home, other than an agreement to which the above regulation applies, we will always include in the quotation the following statement: –

“YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.”

Where the company provides a quotation to a customer in connection with a prospective credit agreement which would or might be secured on their land and under which repayments would be made in a currency other than sterling, we will always include in the quotation the following statement: –

“THE STERLING EQUIVALENT OF YOUR LIABILITY UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENT.”

Where the company provides a quotation to a customer in connection with a prospective credit agreement for the bailment of goods which would or might be secured on the customer’s home, we will always include in the quotation the following statement: –

“YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A HIRE AGREEMENT SECURED BY A MORTGAGE OR OTHER SECURITY ON YOUR HOME.”

7. Credit Brokering

In addition to complying with the regulations and objectives set out in this policy, as a credit broker, the company also ensures that as part of our pre-contract disclosure policy and obligations, we always disclose: –

  • To the customer, the fee, if any, payable by a customer to us for our services.
  • To the customer, any fee to be paid by the customer to us will be agreed between the customer and us, and that agreement will always be recorded in writing or other durable medium before a regulated credit agreement is entered into.
  • To the lender, the fee (if applicable), for our activity payable by the customer for the purpose of enabling the lender to calculate the annual percentage rate of charge for the credit agreement.
  • To the customer, how and when any fee for our service is payable and in what circumstances a refund may be payable, including how and when a refund is available under section 155 of the CCA.

In compliance with the CONC 4.4.3 regulations, the company confirms that we never request, claim, demand, initiate or take payment of a charge from a customer, or from the customer’s payment account, in connection with services we are/have provided.

Any ‘Information Notice’ sent out to a customer will clearly include: –

a) the legal name of the firm as it appears in the Financial Services Register

b) if the firm is not a lender, a statement that the firm is a credit broker and that it is not a lender

c) if the firm is also a lender, a statement that the firm is acting as a credit broker and that it is not acting as a lender

d) a statement that the customer will be required, or (where relevant) may be required, to pay a charge in connection with the firm’s services

e) he amount of the charge, or, where that amount is not ascertainable at the time the notice is sent, the basis on which it will be calculated; and

f) when and by what method the firm will initiate or take payment of the charge.

8. Specific Agreement Regulations

8.1 Hire Purchase & Conditional Sale Agreements

The company always ensures that the customer is advised of (both verbally and in writing): –

  • the customer does not own the goods until the sums required under the agreements have been paid, including any option to purchase fee and any other conditions have been satisfied
  • goods can be repossessed without a court order in the event of default, unless in relation to a regulated credit agreement the customer has paid a third or more of the total amount payable

8.2 Bill of Sale Loan Agreements

The company always ensures that the customer is advised of (both verbally and in writing): –

  • the risk of losing the asset which is the subject of the bill of sale and the loss this could entail
  • that repossession can take place without a court order
  • that repossession may not clear the debt owed; and
  • unlike in the case of hire-purchase agreements and conditional sale agreements, the customer is not protected under this arrangement from repossession of the asset where one third or more of the total amount payable has been paid off

8.3 Credit Token Agreements

The company always ensures that the customer is advised of (both verbally and in writing): –

  • different rates of interest and different charges apply to different elements of the credit provided (for example, a higher cost of withdrawing cash)
  • the implications of only making minimum repayments
  • interest rates or charges may be increased
  • where applicable, the interest rates may be increased based on the risks presented by the individual customer
  • the limitations on any zero percentage or low interest or other introductory offer; and
  • conditions on any balance transfers, including any fees and charges which may apply

8.4 Credit Card Cheques

the company always ensures that the customer is advised (both verbally and in writing) that there are higher associate costs relative to payment by credit card.

8.5 Consolidation Credit Agreement

Where credit is used to consolidate other debts and where any or each of the below conditions applies, the company always ensures that the customer is advised of (both verbally and in writing): –

  • the effect of consolidating the debts will involve payment of a higher rate of interest or charges or both (if the relevant information about existing debts is known to the lender or credit broker)
  • the effect of consolidating the debts will involve increasing the period required for repayment (if the relevant information about existing debts is known to the lender or credit broker); and
  • the credit agreement would be secured on the customer’s property

8.6 Guarantor Credit Agreement

The company always ensures that the customer is advised (both verbally and in writing) prior to making any agreement, that they are required to provide security in the form of a guarantee.

9. Associated Documents

Some of the company’s pre-contract disclosure requirements are set out in more detail in alternate policies and procedures. Where a pre-contract disclosure regulation is complied with in the content of a different policy, such document is listed below and should be used and read in conjunction with our Pre-Contract Disclosure Policy.

  • Distance Marketing Policy
  • Financial Promotions & Customer Communication Policy
  • Continuous Payment Authority (CPA) Policy
  • Responsible Lending Policy
  • Treating Customers Fairly Policy
  • Vulnerable Customer Policy
  • Cancellation & Refund Policy

10. Responsibilities

The company will ensure that all staff are provided with the time, training and support to learn, understand and implement the Pre-Contract Disclosure Policy and associated procedures. Management are responsible for a top down approach and in ensuring that all staff are included and have the support needed to meet the regulatory requirements in this area.

21.11.2 European Standardised Information Sheet (ESIS)

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