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2 January 2019

The FCA has published guidance in CONC 3.10.3 which is relevant to firms which enter into home loans off trade premises.

Section 154 of the CCA makes it a criminal offence to canvass off trade premises credit broking of a kind specified by article 36A(1)(a) to (c) of the Regulated Activities Order, debt adjusting, debt counselling or providing credit information services (within the meaning of section 153 of the CCA).

The FCA takes the view that sections 48 and 49 of the CCA mean that any discussions about new borrowing or refinancing with a customer that take place in the borrower’s home must be initiated by the borrower, either in the form of a specific written request or, only where the individual is in the borrower’s home other than for the purpose of engaging in such discussion, in the form of an oral invitation.

The FCA has considered the potential for the use of “umbrella requests to visit”. “Umbrella requests” or “permissions to call” tend to be signed by a borrower when entering into a borrower-lender agreement (or shortly after) and purport to allow the lender to visit the borrower’s home to discuss other borrowing at any time, over the duration of the agreement or beyond. The FCA takes the view that such “umbrella requests” do not meet the requirements of the CCA. “Umbrella requests” create open-ended opportunities for firms to raise the prospect of additional borrowing, without the borrower having specifically requested or even considered it.

The FCA would expect to see the following for a firm to comply with sections 48 and 49 of the CCA:

(a) the request should be a positive act by the borrower taken specifically for the purpose of discussing other borrowing;

(b) the visit should be made in response to that request. Where a request is reasonably specific on timing, the visit should be within that timing. Where the request is not reasonably specific on timing, any visit should take place within a reasonable proximity to that request for it to be clear that the visit is being made in response to that request; and

(c) there should be a separate request made for each agreement or contractual variation.

In the FCA’s view this would not stop an agent or representative of a firm who has called on a borrower with the sole purpose of collecting on an existing loan from discussing new or additional borrowing if the borrower asks them to do so during the collection visit. However, if the agent or representative raised the topic of new or additional finance, we consider it would be very difficult for them to establish that they had not visited with that purpose.

The FCA expects that firms should be able to rely on their existing procedures for receiving written requests from new customers in relation to existing borrowers.

Firms are reminded that failure to comply with section 49 of the CCA is a criminal offence. Only a court can determine the meaning of sections 48 and 49 of the CCA.

The Guidance can be found here.

By David Petty

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