The Mortgage Credit Directive (Amendment) Order 2015

Explanatory Note

(This note is not part of the Order)

This Order makes amendments to the Mortgage Credit Directive Order 2015 (S.I. 2015/910) (“the original Order”). The original Order transposed in part Directive 2014/17/EU of the European Parliament and of the Council of 4th February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (“the mortgages directive”) (OJ L 60, 28.2.2014, p.34). The Financial Conduct Authority (“FCA”) has transposed other parts of the mortgages directive in rules. A transposition note setting out how the mortgages directive has been transposed into UK law is available from Her Majesty's Treasury, 1 Horse Guards Road, London SW1A 2HQ or on HM Treasury's website (www.gov.uk/government/organisations/hm-treasury).

Article 2(2) ensures that a non-residential or buy-to-let mortgage which would be exempt from being regulated as a credit agreement if entered into immediately before 21st March 2016, but which is a regulated credit agreement at that time (for instance because it was entered into before the existing exemption for such mortgages came into force), does not fall within the definition of “consumer credit back book mortgage contract”. The effect is that such regulated mortgages continue to be regulated by the FCA as regulated credit agreements, rather than being treated as regulated mortgage contracts, following the coming into force of the original Order.

Article 2(3) clarifies that where a person has permission to carry on the regulated activity of advising on regulated mortgage contracts immediately before 21st March 2016, the person is to be treated from that date as having permission to carry on that regulated activity in relation to all contracts which are regulated mortgage contracts after 21st March 2016, and not only in relation to those contracts which would have been regulated mortgage contracts before that date.

Article 2(4) has the effect that the application of the Consumer Credit Act 1974 (c. 39) to certain credit agreements is modified if either the credit broker or the creditor starts to comply early with new rules implementing the mortgages directive. The original Order provided for such modified application only if the creditor starts to comply early with such new rules.

Articles 2(5) and 3 substitute a new amendment to the Consumer Credit (Agreements) Regulations 1983 (S.I. 1983/1553) for the amendment made by the original Order, to correct an error in the original Order.

Article 2(6) amends the requirements which apply to a consumer buy-to-let mortgage contract which falls within the definition of a “foreign currency loan”, so that the two requirements set out in paragraph 14(1)(a) and (b) of Schedule 2 to the original Order become alternative rather than cumulative requirements.

An impact assessment has not been produced for this instrument as no significant impact on the costs of business or the voluntary sector is foreseen.