Respondents to the FCA’s initial consultation paper were concerned that the timeline for implementation would make it difficult to be ready ahead of time, after the regulator proposed to ‘turn on’ its rules ahead of the directive’s final deadline.
Despite this, however, the FCA said it would still be ‘helpful’ to allow firms the option to apply the rules even further ahead of time should they wish to in order to help firms manage their sales pipeline more smoothly. As a result, the final policy paper now reflects that the regulator will allow firms to fully implement the rules as of 21st September 2015, a full six months ahead of the final implementation date for the Directive.
A response from the Treasury notes that while firms may wish to implement the new rules ahead of time, any mortgages undertaken before the final implementation date do not need legally to be subject to the MCD.
The FCA policy paper said;
“Industry respondents welcomed the flexibility of being able to apply the rules early. However, many were concerned that the MCD did not explicitly recognise the sales pipeline. Industry representatives also made this point strongly to the Government in response to its consultation on the legislation, which the final legislation addresses.”
The Treasury provided further clarification on its implementing legislation in its summary of consultation responses:
”The government has also made it clear that, where credit is granted pursuant to an agreement that exists before the implementation date of 21 March 2016, the affected mortgage does not need to be subject to the MCD. It will be for firms to assess when an agreement exists; and that question is a matter of fact and law that may depend on the practice of the individual lender.
“However, for example, it may be the case that an agreement exists at the formal offer stage of the mortgage lending process. Where such an agreement exists before 21 March 2016 the regulatory treatment as it was prior to the amendments to implement the MCD can be applied”.
The Government’s intention is that second charge firms will be able to adopt the MCD provisions voluntarily from September 2015, and that where they do so Consumer Credit Act requirements will not apply. The legislation in its current form 'may not disapply the Consumer Credit Act requirements in all circumstances', but the FCA says it understands that the Government intends to resolve this before September 2015.
