LIBF CeMAP (Certificate in Mortgage Advice and Practice) — All Questions

An adviser must present the costs and features of a recommended mortgage in a way that is balanced. This means the adviser should:

• a.Omit any mention of fees
• b.Give appropriate prominence to risks and disadvantages as well as benefits✓
• c.Emphasise only the benefits of the product and leave the customer to discover any drawbacks for themselves later on
• d.Focus solely on the monthly payment

MCOB and the Consumer Duty require balanced communication: benefits and risks should each be given appropriate prominence, so the customer is not left with a misleadingly favourable impression and can make an informed decision.

For a joint mortgage application, an adviser giving advice must ordinarily assess suitability by reference to:

• a.Only the first-named applicant
• b.The needs and circumstances of both applicants✓
• c.Neither applicant, since it is a joint loan
• d.Only the higher earner's circumstances

On a joint application the recommendation must be suitable for the applicants together, so the adviser must take account of both borrowers' needs, circumstances and objectives, as well as the lender assessing affordability using their combined position (MCOB 4.7A and 11.6).

A firm's financial promotion for a mortgage quotes an attractive headline rate but hides the fact that a large arrangement fee applies. This promotion breaches MCOB because it is:

• a.Written in plain English
• b.Not clear, fair and not misleading✓
• c.Aimed at existing customers
• d.Too short

A promotion that highlights a low rate while concealing a material fee gives a misleading impression of cost and breaches the requirement that financial promotions be clear, fair and not misleading (MCOB 3A and the FCA's Principles).

A customer who does not qualify for any permitted execution-only route contacts an interactive sales channel. Under MCOB the firm should generally:

• a.Complete the sale with no disclosure
• b.Refuse to deal with the customer
• c.Direct the customer to a comparison website only
• d.Provide advice and assess suitability✓

Because advice is the default for interactive sales after the MMR, a firm dealing with a customer who does not meet an execution-only exception must give advice and carry out the suitability assessment required by MCOB 4.7A.

The main advantage to a customer of an advised sale, compared with execution-only, is that:

• a.No affordability check is carried out
• b.The firm assesses suitability and is responsible for the recommendation✓
• c.The customer avoids all fees
• d.The mortgage obtained through an advised sale is always cheaper than one obtained on an execution-only basis

On an advised sale the firm takes responsibility for recommending a suitable product, giving the customer recourse if the advice is unsuitable. On execution-only the customer bears responsibility for product choice, though the lender's affordability duty still applies.

An adviser learns the customer intends to let the property to tenants rather than live in it. The adviser should recognise that this may:

• a.Automatically qualify for the lowest residential rate
• b.Take the loan outside a standard regulated residential mortgage and possibly into buy-to-let✓
• c.Make no difference at all to the type of mortgage required or to the way in which it is regulated in any respect
• d.Remove the need for any valuation

A property intended to be let, rather than occupied by the borrower or a related person, generally does not meet the 40% dwelling-use test for a regulated residential mortgage and is likely to be buy-to-let, which has different regulation and product criteria the adviser must identify.

If a customer complains that the mortgage advice they received was unsuitable, the firm must first:

• a.Handle the complaint under the FCA's complaint-handling (DISP) rules✓
• b.Ignore the complaint unless it is repeated three times
• c.Refer the customer straight to the Financial Services Compensation Scheme without investigating the complaint at all
• d.Change the customer's interest rate

Complaints must be handled under the FCA's DISP rules, with a fair investigation and a final response within the required timescale. Only if the customer remains dissatisfied and the firm cannot resolve it may the matter go to the Financial Ombudsman Service.

A customer asks the adviser to leave a small planned inheritance out of the affordability picture so the loan looks larger. The adviser should:

• a.Do exactly as the customer asks and leave out the inheritance so as to help secure the larger loan that they want
• b.Inflate the customer's income to compensate
• c.Submit the application without any income evidence
• d.Base the assessment on accurate, verifiable information and not misrepresent the position✓

Advisers must act with integrity and ensure applications are accurate. Manipulating figures to secure a larger loan risks unaffordable lending and mortgage fraud; the adviser must rely on verifiable information and the lender's genuine affordability assessment (MCOB 11.6).

Under MCOB, an ESIS should be presented in a way that is:

• a.Written in a foreign language
• b.Standardised, so customers can compare offers from different lenders✓
• c.Presented in a completely different layout by every lender, with no common format shared between them at all
• d.Available only after completion

The ESIS uses a standardised format prescribed by the MCD so that key features and costs appear in a consistent place, enabling customers to compare mortgage offers from different lenders on a like-for-like basis (MCOB 5A).

When explaining the difference between advice and execution-only to a customer, the adviser should make clear that on execution-only:

• a.The firm guarantees to the customer that the product they have chosen for themselves is fully suitable for their needs
• b.The customer receives a personal recommendation
• c.No mortgage documents are provided
• d.The customer takes responsibility for choosing the product and receives no recommendation✓

It is central to informed consent that the customer understands that on execution-only the firm makes no personal recommendation and does not assess suitability, so the customer is responsible for deciding the product is right for them (MCOB 4.8A).

An adviser recommends a product mainly because it pays the firm a higher procuration fee, despite a more suitable option being available. This breaches:

• a.Nothing, because procuration fees are allowed
• b.Only the lender's own internal policy on procuration fees, but no rule actually made by the FCA or set out in MCOB
• c.The suitability duty and the Consumer Duty's requirement to act in the customer's interests✓
• d.The Building Regulations

Procuration fees are permitted, but they must not drive an unsuitable recommendation. Placing the firm's remuneration ahead of a more suitable product breaches MCOB 4.7A suitability and the Consumer Duty's requirement to avoid causing foreseeable harm and to act in good faith.

A firm offering both advised and execution-only channels must, under MCOB, ensure that a customer routed to execution-only:

• a.Genuinely qualifies for that route and is not steered away from advice they need✓
• b.Always pays a higher price
• c.Is never given any documents
• d.Formally signs a declaration giving away their statutory right to complain about the outcome of the sale afterwards

MCOB 4.8A and the Consumer Duty require that customers are not inappropriately funnelled into execution-only to avoid the advice obligations. The route must genuinely fit the customer's situation, and customers must not be discouraged from advice they need.

A mortgage adviser must hold an appropriate qualification and be assessed as competent. This requirement primarily protects consumers by ensuring advice is:

• a.Given only by the lender's directors
• b.Free of charge in all cases
• c.Identical for every customer
• d.Given by someone competent to assess suitability✓

The FCA's Training and Competence (TC) rules require mortgage advisers to attain and maintain competence and hold an approved qualification, so that suitability assessments under MCOB 4.7A are carried out by people equipped to do them properly.

An adviser should give the customer the ESIS and explain it so that the customer can:

• a.Skip reading the formal mortgage offer entirely, relying instead only on the adviser's brief spoken summary of it
• b.Avoid any need for legal conveyancing
• c.Negotiate the estate agent's commission
• d.Understand the key features and costs before deciding whether to apply✓

The ESIS exists to help the customer understand and compare the loan's key features and costs before committing. Explaining it supports the Consumer Duty's consumer-understanding outcome and the MCOB requirement to disclose information in good time (MCOB 5A).

Which best describes the relationship between the pre-MMR 'Treating Customers Fairly' framework and the current Consumer Duty?

• a.The Consumer Duty abolishes all conduct standards
• b.They are identical in every respect
• c.Treating Customers Fairly still applies to mortgage sales, whereas the Consumer Duty applies only to investment and pension business and never to home finance
• d.The Consumer Duty sets a higher standard, requiring firms to act to deliver good outcomes rather than merely treat customers fairly✓

The Consumer Duty builds on and raises the bar above the older Treating Customers Fairly outcomes. Rather than simply requiring fair treatment, Principle 12 requires firms to act to deliver good outcomes for retail customers across the four defined outcome areas.