Mortgage Credit Directive and Foreign Currency Loans | Mortgage and Home Finance Conduct of Business MCOB | Template for FCA Applications and Authorised Firms

Mortgage Credit Directive

6.8.1 Introduction

The Mortgage Credit Directive (MCD) is European (EU) legislation that had been developed and designed to bring about a single market for mortgages, with an additional aim of offering further protection to consumers and their interests. The finalised MCD text was published by the European Commission in February 2014 and it will be the role of the Financial Conduct Authority (FCA) to implement and oversee the MCD through rules, regulations and guidance that they have set. These new FCA regulations took effect from 21 March 2016 and are now a part of the overall compliance regime for the company.

The main changes that the MCD has brought about in the mortgage lending sector are: –

• Certain buy-to-let mortgages now come under the regulatory jurisdiction of the FCA
• There are additional data reporting requirements in the form of:
  • The Mortgage Lending & Administration Return (MLAR)
  • The Retail Mediation Activities Return (RMAR)
  • CBTL lenders will have to submit aggregated data on their CBTL lending, arrears and complaints activity
  • Product Sales Data reporting will be a requirement for second charge firms
• For loans covered by the MCD, firms will now need to use a new method of calculating Annual Percentage Rate of Charge (APRC), which is the total cost of the credit to the consumer, expressed as an annual percentage of the total amount of credit. The company uses the European Commission’s MCD APRC Simulator for reviewing the compliance of our calculation methods.
• UK authorised firms who want to conduct mortgage activities in an EEA state will be able to apply for a ‘Passport’ under the MCD.
• Replacing Key Facts Illustration (KFI) with the European Standardised Information Sheet (ESIS) disclosure document.

Where The company provides information in compliance with the requirements in MCOB that relate to an MCD regulated mortgage contract, we always provide such information free of charge.

6.8.2 Foreign Currency Loans

Where The company provides an MCD regulated mortgage contract that relates to a foreign currency loan, at the time the MCD regulated mortgage contract is entered into, we always ensure by way of checks, questions and evidence documents, that: –

• The consumer has a right to convert the MCD regulated mortgage contract into an alternative currency under specified conditions
• There are other arrangements in place to limit the exchange rate risk to which the consumer is exposed under the MCD regulated mortgage contract

Alternative currency as referred to above and in MCOB 2A.3.1R, must be either: –

1. The currency in which the consumer primarily receives income or holds assets from which the credit is to be repaid, as indicated at the time that the most recent affordability assessment in relation to the regulated mortgage contract was made
2. The currency of the EEA State in which the consumer either was resident at the time that the MCD regulated mortgage contract was entered into or is currently resident

Where a consumer has a right to convert the MCD regulated mortgage contract into an alternative currency in accordance with MCOB 2A.3.1R, the company uses the market exchange rate applicable on the day of application for conversion, unless we otherwise specify in the MCD regulated mortgage contract.

We understand that we must always disclose to the consumer our arrangements for complying with the obligations above and in MCOB 2A.3.1 R in the MCD regulated mortgage contract.

[Insert a copy of your standard MCD Regulated Mortgage Contract or reference the external location for auditing purposes]