A cash advance is unsecured borrowing, regulated under the FCA’s Consumer Credit Sourcebook, known as CONC. A secured homeowner loan, sometimes called a second charge mortgage, is a different product regulated under a different FCA rulebook, the Mortgages and Home Finance: Conduct of Business sourcebook, known as MCOB. Understanding which rulebook applies matters because the two set different requirements for lenders and give borrowers different protections.
What makes a loan “secured” on a home
A secured homeowner loan is secured by a legal charge over the borrower’s property, ranking behind the first mortgage the borrower already has, which is why it is described as a second charge. If repayments are not kept up, the lender’s ultimate remedy is to seek repossession of the property through the courts, in the same way a first mortgage lender can. A cash advance carries no such claim over any specific asset; a lender’s remedy for non-payment is the general debt recovery and default process covered elsewhere on this site, not repossession of a home.
The 2016 change that moved second charge lending into MCOB
Second charge lending was not always regulated as a mortgage product. The FCA Handbook confirms that, following implementation of the Mortgage Credit Directive, MCOB has applied to second charge regulated mortgage contracts, including those entered into before the change took effect, from 21 March 2016. Before that date, this type of lending sat under consumer credit regulation instead. CONC itself confirms the current boundary, stating that CONC does not apply to credit agreements secured on land, with limited exceptions, because agreements secured by a second or subsequent charge on a customer’s home are regulated under MCOB from 21 March 2016 rather than under CONC.
What MCOB requires that differs from CONC
MCOB reflects the fact that a home, not just a credit file, is at risk. It sets requirements around advising on and selling mortgage-related products, disclosure of the overall cost and risks before the borrower commits, and how a lender must deal with a borrower who falls into arrears, including exploring ways of managing the arrears before repossession is pursued. CONC, covering unsecured lending such as a cash advance, has its own arrears and forbearance requirements too, but the underlying product and the ultimate consequence of serious default are different: a home is not at stake with an unsecured cash advance in the way it is with a second charge loan.
Why the distinction matters when comparing borrowing options
Some borrowers consider a secured homeowner loan specifically to consolidate other debts, including a cash advance or other short-term borrowing, often because the interest rate on a secured loan can look lower than unsecured rates. Because the underlying legal position is different, that lower rate has to be weighed against the fact that a secured loan puts the home itself at risk if payments are not kept up, where an unsecured cash advance does not. This trade-off is a central point in the debt consolidation guidance covered elsewhere on this site.
Checking which type of loan is being offered
A lender offering a second charge secured loan must be authorised for the relevant regulated mortgage activity, not just for consumer credit activity, and this can be checked on the Financial Services Register in the same way a cash advance lender’s authorisation can be checked, as covered elsewhere on this site. Because the rulebook and the risk are different, a borrower comparing offers should establish clearly, before signing anything, whether a loan being offered is secured against the home or is unsecured, rather than assuming from the interest rate or marketing alone.
What stays the same either way
Whichever rulebook applies, the FCA’s Consumer Duty, requiring firms to act to deliver good outcomes for retail customers, applies across both secured and unsecured regulated lending. Access to the Financial Ombudsman Service if a complaint cannot be resolved with the lender is also available for both types of regulated borrowing, though the underlying product terms, arrears process and ultimate consequences of default remain distinct between the two.
FAQs
Is a secured homeowner loan regulated in the same way as a cash advance?
No. A secured homeowner loan is regulated under MCOB as a mortgage-related product, while a cash advance is regulated under CONC as consumer credit.
When did second charge loans move to mortgage regulation?
The FCA Handbook confirms MCOB has applied to second charge regulated mortgage contracts, including those already in existence, since 21 March 2016.
What is the main practical risk difference?
A secured homeowner loan puts the home at risk of repossession if payments are not kept up; an unsecured cash advance does not carry that specific risk, though it still affects the credit file and can lead to court action for the debt.
Do both types of loan need FCA authorisation?
Yes, but for different regulated activities: consumer credit lending for a cash advance, and mortgage-related regulated activity for a second charge secured loan.
Bottom line
A secured homeowner loan and a cash advance may both appear as ways to borrow money, but they sit under different FCA rulebooks, MCOB and CONC respectively, because one is secured against a home and the other is not. That difference in regulation reflects a real difference in risk: a home can ultimately be repossessed to recover a second charge loan, which is not a consequence of an unsecured cash advance. This article is general information, not financial advice on a specific loan; a mortgage adviser or debt adviser can help compare options for a specific situation.