Inducements and Protecting Customers Interests | Mortgage and Home Finance Conduct of Business MCOB | Template for FCA Applications and Authorised Firms

6.3 Inducements

As per the FCA definition, an inducement is a benefit offered with a view to bringing about a particular course of action. Firms regulated under the MCOB provisions, must ensure that no inducement is accepted (or is able to be accepted by staff, 3^rd parties or businesses/individuals representing the firm), in return for advice, home finance or any regulated mortgage contact. As such, the company have policies, procedures, controls and measures in place for Remuneration, Incentives and Commissions (see section 6.12 of this manual) and strict compliance monitoring procedures.

In accordance with MCOB 2.3, the company always takes reasonable steps to ensure that it, and any person acting on its behalf, does not: –

• Offer, give, solicit or accept an inducement
• Direct or refer any actual or potential business in relation to a regulated mortgage contract, home reversion plan or regulated sale and rent back agreement to another person on its own initiative or on the instructions of an associate

[INSERT INDUCEMENT PREVENTION PROCEDURES HERE IF APPLICABLE]

We understand that in relation to MCOB 2.3.2 R, the company are not prevented from:

• Assisting a home finance intermediary so that the quality of the home finance intermediary’s service to customers is enhanced; or
• Giving or receiving indirect benefits (such as gifts, hospitality and promotional competition prizes)

The above exclusions are permitted providing in either case that this is not likely to give rise to a conflict with the duties that the recipient owes to the customer. Such benefits are not permitted where they are of a kind or value that is likely to impair the ability of either the company, a staff member or a firm working on our behalf, to act in compliance with any rule in MCOB.

We also confirm that we have procedures and controls in place to ensure that we never operate a system of giving or offering inducements to a mortgage intermediary, reversion intermediary, SRB intermediary or any other third party whereby the value of the inducement increases if the intermediary or third party, such as a packager, exceeds a target set for the amount of business referred. We also do not solicit or accept an inducement whereby the value of the inducement increases if we exceed a target set for the amount of business referred.

6.4 Protecting Customers’ Interests

MCOB 2.6 gives specific regard to the protection of customers interests in relation to: –

• Regulated Mortgage Contracts
• Home Purchase Plans
• Home Reversion Plans
• Regulated Sale and Rent Back Agreements

This Compliance Manual and the company already give due regard and comply with our many regulatory obligations to PRIN 6 in the FCA Handbook – Customers’ Interests. However, the provisions and objectives set out below are specific to those requirements of MCOB.

With regards to any activities carried out by the company in its capacity as a Mortgage Lender, we confirm that we only ever include, or rely on, a term in our regulated mortgage contract which permits us to change the rate of interest from a fixed, discounted or other concessionary rate to that of the firm’s standard variable rate in the event of a breach of contract, if and when each of the following conditions has first been met:

• the breach of contract is material
• the breach of contract is unrelated to a payment shortfall; and
• that standard variable rate is not an interest rate created especially for customers who are (either at all, or in particular ways) in breach of contract.

[Please Insert a Standard Copy of Your Regulated Mortgage Contract & Terms]

As a provider of the below products/services: – [Delete as Applicable]

• Home Purchase Plan
• Home Reversion Plan
• Regulated Sale and Rent Back Agreement

The company understands its obligation to ensure that the interests of our customers are always protected to a reasonable standard. Our objectives include making provisions, procedures and measures to ensure that a customer will be protected in the event of: –

• The failure of a reversion provider, home purchase provider or SRB agreement provider
• The transfer of a reversion provider’s, home purchase provider’s or SRB agreement provider’s interest (or the interest the provider would have had, had it not nominated a third party to hold it) in the property to a third party
• Other dealings by a reversion provider, home purchase provider or SRB agreement provider (or its nominee) with a third party
• A reversion provider’s, home purchase provider’s or SRB agreement provider’s (or its nominee’s) failure to perform obligations owed to third parties or imposed by statute.

[Please Insert Your Provisions and/or Procedures for the Above Circumstances if Applicable]

Where we have been unable to ensure reasonable protection of a customers’ interests in the event of one or more of the above instances, the company does not enter into, arrange or administer the plan. In compliance with the FCA’s guidance, MCOB 2.6A and our own obligation to protect a customers’ interest, the company has the below objectives.

The company strives to ensure: –

• The protection of the customer’s rights under the plan, in particular the right to occupy the property throughout its term
• The protection of any interest (legal or beneficial) that the customer retains, acquires or is intended to acquire in the property, including the expectation that such interests will be unencumbered by third party interests
• That, where a customer pays sums under a home purchase plan towards the purchase price of the property, those sums will be applied towards the purchase price. Or, in circumstances where that is not practicable (for example, on repossession), that an appropriate amount will be returned to the customer
• A customer’s contractual entitlement to receive certain sums back after a qualifying period, such as where it has been agreed that a certain percentage of discount will be refunded to the customer after a set period of tenancy
• That we have always explained to the customer those aspects of the customer’s legal rights and obligations under the home reversion plan that they need to understand.
• That before an SRB agreement seller enters into a regulated sale and rent back agreement, the SRB agreement seller is made aware of the availability and importance of independent legal or professional advice

[If your firm provides regulated sale and rent back agreements – you should include the regulations and your controls for complying with MCOB 2.6A.5B here.]