The Mortgage Conduct of Business (MCOB) rules are a comprehensive set of guidelines and regulations that mortgage lenders and intermediaries in the UK must follow to ensure the fair treatment of customers.
The MCOB rules cover a wide range of activities, from the initial promotion and advertising of mortgage products, through the advice and selling process, to the administration of mortgage contracts, including the handling of payment difficulties and arrears.
The MCOB rules include:
- Responsible lending and affordability: Mortgage lenders must undertake a thorough assessment of a borrower’s ability to repay the loan. This involves a detailed examination of the borrower’s income and outgoings, as well as potential changes to their circumstances or the economy that could impact their ability to repay.
- Disclosure and transparency: Lenders and intermediaries must provide clear, fair, and not misleading information at all stages of the process. They must issue a ‘Key facts illustration‘ (KFI), which outlines the costs, features and risks of a mortgage.
- Advice and selling standards: Where advice is given, it must be suitable for the customer’s needs and circumstances. The sales process must be clear, fair, and not misleading.
- Dealing with payment difficulties: Lenders must have policies and procedures in place to treat customers in arrears fairly and to deal with cases of financial difficulty.
- Product design: Mortgage products must be designed to meet the needs of identified consumer groups and must be targeted accordingly.
The MCOB rules aim to ensure that the mortgage market operates in a way that advances the FCA’s operational objectives, which include protecting consumers, protecting and enhancing the integrity of the UK financial system and promoting competition in consumers’ interests.
MCOB rules are legally binding. Firms can be fined or face other regulatory action if they fail to comply with them.