Mortgage Credit Directive draft regulations & second charge

[Fred]

https://www.gov.uk/government/upload...egulations.pdf

Page 13 Article 61. (Draft) Amendments to the existing;

http://www.legislation.gov.uk/uksi/2...rticle/61/made

---------------------------------------
FCA statement;

What happens to second charge mortgages
entered into before 21 March 2016?
If a second charge mortgage was regulated under the
consumer credit regime as at 20 March 2016, it will
become a regulated mortgage contract and relevant
MCOB provisions will apply from 21 March 2016 – for
example, the rules on post-sale disclosure (MCOB 7)
and charges (MCOB 12). In addition, some Consumer
Credit Act (CCA) provisions will be retained for these
loans, including the prohibition on interest being
increased on default (section 93), the right to complete
payments ahead of time (section 94) and the right to a
rebate on early settlement (section 95)5.

The above an extract from the the attached FCA document which, casts some doubt on what is/will happen to "unregulated" (as in "unregulated" by the CCA 1974 Act) second charge loans.

I do not see any exclusions/inclusions on secured loans/mortgages not regulated by the CCA 1974 in the draft regulations (amendments) listed above which, gives rise to question what exactly is meant by, "consumer credit regime" in the FCA statement above.

I can only (for now) assume there must be a definition somewhere of what the "Treasury" considers to be a, second charge back book loan that "is" to be regulated by the new rules as per first charge loans/mortgages. I have not yet been able to find any such "definition" which accurately describes all the loans/mortgages that fall within the description of "second charge"

As I understand it, it is for, the Regulated Activities Order 61 to be amended to, include second charge loans/mortgages as regulated mortgages. The MCOB rules will pretty much remain the same.

What am I missing here ?

[meellis]

Re: Mortgage Credit Directive draft regulations & second charge

Well reading those various files is a little bit confusing to say the least, are we about to find out more that a second charge mortgage isn't a mortgage if it was unregulated (old argument to resurface). It could read that all second charge become as per regulated CCA contracts but it really is a s clear as mud and needs definite clarification. I sometimes get the impression that the govt and regulators want to ignore the existence of second charge un-regulated loans.

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

Fred,


Apologies for the delay in replying back to you in relation to your question if your loan of £45000 which was obtained in 2006 and secured by a second legal charge would become regulated by us under the Mortgage Credit Directive.


I have obtained clarification on this matter and I can now confirm that this loan would remain out of scope of the FCA's regulation when the Mortgage Credit Directive (MCD) comes into effect from 21st March 2016. Therefore this loan would remain unregulated and not subject to our rules and regulations.


Yours Sincerely


Andrew Stock
Associate | Customer Contact Centre
Financial Conduct Authority | www.fca.org.uk
Consumer Helpline: 0300 500 8082

[Ruby]

Re: Mortgage Credit Directive draft regulations & second charge

What about a second charge taken out in August 2007 for 50K?

What I have just read is very disappointing to say the least. It seems that the FCA do not want to touch the matter of 'unregulated' with a barge pole.

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

What about a second charge taken out in August 2007 for 50K?

What I have just read is very disappointing to say the least. It seems that the FCA do not want to touch the matter of 'unregulated' with a barge pole.

Might be subject to transitional requirements but, doubt it, the only second charge loans to be transferred (as I see it) are those regulated by the CCA 1974. This was applicable to all from April 2008 as it removed the financial qualification limit of 25K.

[meellis]

Re: Mortgage Credit Directive draft regulations & second charge

The question would be that all became liable to CCA albeit only through 140a/b.

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

The question would be that all became liable to CCA albeit only through 140a/b.

As I, understand it, unregulated stays that way regardless, there are some provisions that come from the CCA 1974 as you correctly state which, do apply to unregulated loans but, that is it am afraid.

Also note, the CCA 1974 unfair relationships does transfer in addition to the MCOB on second charge loans (back book) that are regulated agreements.

I would be very interested to see how two of the same agreements would be dealt with under the differing rules.

[meellis]

Re: Mortgage Credit Directive draft regulations & second charge

Personally I feel they are splitting hairs because it is obvious that nobody wants to take charge due to the amounts involved. I have come to the conclusion that all the regulatory bodies in this country have been put in place purely so that the respective government can say that they have something in place to regulate. The true facts are that these bodies will only regulate against the powerless because they are powerless and ineffective themselves, window dressing springs to mind.

[meellis]

Re: Mortgage Credit Directive draft regulations & second charge

This scenario makes me realise the sort of things Cameron and his cronies want. Europe probably wanted these all encompassed into the European directive but things like this is why Cameron wants to be able to opt out of the powers that Europe has. The FCA has probably cherry picked from the directive and translated to what suits them probably because there would be less work to amalgamate regulated agreements into the directive. Like the norm it will boil down to legal brains to argue the finer points when and if a case comes up that will be able to fund it. If Europe stipulated all second charge secured loans/mortgages then it will be down to good barristers making sure the relevant people realise that.

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

Whilst "unregulated" second charge agreements are not (as we now know) part of the MCD, they, have to evolve with the relevant legislative changes over the term of the agreement.

As, again, I understand it the, CCA 1974 140 a/b is retrospective, legislative changes more often not.

[Ruby]

Re: Mortgage Credit Directive draft regulations & second charge

This reading is so depressing, but I agree with what is being said.

It is not what you know but who you know, so probably between us we don't know the right people to make a difference :tinysmile_cry_t:

Ok, which one of us went to Eton - NOT ME

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

School of hard knocks unfortunately for me Ruby.

[Ruby]

Re: Mortgage Credit Directive draft regulations & second charge

Me too!

[meellis]

Re: Mortgage Credit Directive draft regulations & second charge

The one thing that needs to be considered though is that 140a/b unfair relationships wasn't part of CCA 1974 but was actually brought in in CCA06 because the original framework in CCA74 (extortionate credit bargains) wasn't up to the job. One of the reasons it was brought in was believed to be a way to control the un-regulated area a bit more which it is still being tested in that area. The other thing to be considered would be the actual wording of the directive which again would have to be tested but if the wording is asking for all secured second charge loans/mortgages are to come under control then just because the FCA has stated that it doesn't come under their remit it doesn't mean they have got it right.

[Fred]

Re: Mortgage Credit Directive draft regulations & second charge

When the FCA considered this part of your complaint in June 2014 it told you that this was
not something it could consider because your complaint was about the FCA’s general policies
and therefore excluded from the Scheme. I agree with the FCA’s decision. However, since
the FCA considered this element of your complaint it has undertaken a consultation exercise
(under CP14/20) on the implementation of the European Mortgage Credit Directive (which
included the provision and administration of second charge mortgages). In the Policy
Statement it issued in March 2015, which set out its findings and future intentions, PS15/9
(https://www.fca.org.uk/your-fca/docu...ements/ps15-09), the FCA set out that
from 21st March 2016 the regulation of the second charge mortgage market will be
transferred from the Consumer Credit Act and the high level principles and rules contained
within the FCA’s Consumer Credit Sourcebook and instead will be encapsulated within the
FCA’s Mortgage Conduct of Business Sourcebook.
I appreciate that you may feel that the FCA did not action quickly enough but the FCA was
required to consult consumers and the industry about highly complex issues before making
rules, and the industry has to be given time to make the necessary changes. In the
circumstances, I consider that the FCA has acted promptly since assuming its new
responsibilities for consumer credit. For the sake of completeness I would add that paragraph
3.4 (b) of the Complaints Scheme prevents me from considering complaints about the FCA
rules (which includes the date when these will be introduced).
Although it is unfortunate that the FCA did not explain to you clearly that it was consulting
on the regulation of second charge mortgages, it was already taking action when it revisited
your complaint in early 2015.
I also appreciate that you feel that the FCA has failed to consider adequately the conduct of
Firm F in relation to alleged breaches of the Sections 4.4 and 5 of the UTCCR. I can confirm
that the FCA is aware of your concerns and has considered whether the contractual term in
question complies with the UTCCR Regulations in general. In assessing the terms contained
within Firm F’s contracts the FCA has considered two County Court judgments which have
been brought to its attention.
--------------------------------------
The UTCCR 5.1 was pointed out (unfair terms) the SCLG 4.4 somehow got thrown in there.........the references....wrong.........carefully considered.......no.

The regulatory point, pointed out..........totally missed (as in not regulated) The next steps.............to be decided.