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Mortgage advertising under the FSA

Prompted by the many confused advisers who contacted me last week, below is a brief resumé of the new rules regarding advertising.

The FSA&#39s detailed requirements for advertising are set out in MCOB Financial promotion – a mere 38 pages. However, you must also make yourself aware of the relevant sections of the main FSA Handbook, namely:

From the Principles for Businesses (PRIN):

• Principle 6: Customers&#39 interests (a firm must pay due regard to the interests of its customers and treat them fairly).

• Principle 7: Communications with clients (firms must pay due regard to information needs of clients, and communicate information in a way which is clear, fair and not misleading).

From Senior management arrangements, Systems and Controls (SYSC):

• SYSC 3: Systems and controls (a firm must take reasonable care to establish and maintain such systems and controls as are appropriate to its business) The rules are wide-ranging and cover all forms of media used to communicate qualifying credit promotions (face-to-face, brochures, presentations, websites, newspapers, magazines, mailshots, telemarketing, sales aids etc).

To clarify some of the new terminology:

• Real-time qualifying credit promotion: These are communicated during &#39normal&#39 conversation for example telephone conversations, interactive dialogue and personal visits.

• Non-real-time qualifying credit promotion: These are communications not made during conversation, e.g. letter, email, website or by radio and television.

• Solicited: Initiated by the receiver, or to give its FSA definition, &#39at the express request&#39 of the customer.

• Unsolicited : More commonly known as cold calling.

There will be a new required risk statement to be used in all communications (with the exception of sound or TV commercial broadcast or within exhibitions of pictures or films): “Your home may be repossessed if you do not keep up repayments on your mortgage.”

And where relevant you must also include these risk statements: “This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration” and, “Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.”

On top of these you must adhere to standard terminology when relevant:

• Early repayment charge (and not early redemption penalty or similar).

• Higher lending charge (and not mortgage indemnity premium or similar).

With regard to points relating to non-real time qualifying credit promotions, they will have to adhere to the following format:

• Confirm the name of the firm (or appointed representative)

• Provide a contact point.

And finally, be &#39clear, fair and not misleading&#39. To do this you must ensure within your promotion that:

• Matters are not omitted

• There is a balance between benefits and disadvantages

• Plain English is used

• Any facts are substantiated and comparisons verified

• The purpose is not disguised or open to misinterpretation

• Any assumptions are clearly and prominently disclosed

• Any statement of opinion is honestly held

&#149 ;It does not contain a false indication with regard to the firm&#39s independence/resources

• It does not include any reference to approval by the FSA or any government body Real-time qualifying credit promotions must also be &#39clear, fair and not misleading&#39. You must therefore ensure:

• There are no untrue claims

• Name of adviser, firm and purpose of the call is disclosed

• The customer wishes to proceed with the call

• The customer is aware they can end the communication at any time

• A point of contact is provided

• The call is not made at an unsocial hour (on Sunday or before 9am or after 9pm on any other day)

• The call is not made to an unlisted number.

Telephone: 020 7357 6866


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