European Code of Conduct

This page contains information on -

• What is the European Code of Conduct?  
• Background
• Impact of UK Mortgage Regulation on UK lenders' ability to comply

What is the European Code of Conduct? 

The European Code of Conduct is a voluntary initiative, which was co-ordinated by the European Mortgage Federation together with other European Credit Sector Associations, representatives of consumer bodies and officials at the European Commission. The Code of Conduct was based on the CML's voluntary Mortgage Code, and officially came into effect on 30 September 2002. We signed up to the Code of Conduct on behalf of all our members. The provisions of the Code of Conduct are now reflected in the statutory regime of mortgage regulation which came into effect in the UK on 31 October 2004.

A copy of the Code of Conduct is attached below.

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Background

Discussions on a possible European Code began in 1996. Since the UK’s own Mortgage Code was already well advanced, it was taken as the starting point for discussion on a European version. The European Code of Conduct is therefore based on the UK's Mortgage Code, but its scope is more limited. It does not apply to mortgage intermediaries and does not cover the provision of mortgage advice. Rather, it concentrates on the amount and quality of pre-contractual information given to consumers.

In March 2001 the European Commission published a Recommendation to all member states urging their lenders to sign up to the Code of Conduct.  Lenders were asked to sign up by submitting their names by the end of September 2001 to a Register to be compiled and kept by the Commission. We wrote to the Commission in September 2001, formally advising it that all our members were prepared to abide by the provisions of the Code of Conduct.

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Impact of UK Mortgage Regulation on UK lenders' ability to comply

The FSA's new regime of mortgage regulation came into effect on 31 October 2004, and the Mortgage Code ceased to have effect from that date. Because the Code of Conduct had been based on the UK's Mortgage Code, we took the view that any UK lender which subscribed to our Mortgage Code would also be compliant with the Code of Conduct.  We also took the view that the FSA's mortgage rules would include all the provisions and requirements of the Code of Conduct (indeed, the MCOB rules go much further) and that UK lenders should not need to provide any additional information or take any action in addition to that required by MCOB in order to comply with the Code of Conduct.

There is one respect, however, in which a number of UK lenders may not fully comply with the Code of Conduct. This relates to the inclusion, in the information to be given to consumers, of an “amortisation table” which shows the full schedule of mortgage repayments throughout the life of the mortgage. When drawing up its mortgage rules, the FSA carried out its own research into whether UK consumers would understand and make use of amortisation tables.  It concluded that they would not find them useful, and decided not to require UK lenders and intermediaries to provide them. It is therefore up to individual firms to decide whether to include these tables: where they decide not to do so, they will technically not be fully compliant with the European Code of Conduct.

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