European Union issued Directive on Credit Agreements Relating to Immovable Property

Date Published 2/4/2014
Author Marja Hoek-Smit
Theme Housing Finance Policy

The objective of the Directive is to ensure that consumers entering into credit agreements relating to immovable property benefit from a high level of protection. The Directive lays down a common framework for certain aspects of the laws, regulations and administrative provisions of the Member States concerning agreements covering credit for consumers secured by a mortgage or otherwise relating to residential immovable property, including an obligation to carry out a creditworthiness assessment before granting a credit, as a basis for the development of effective underwriting standards in relation to residential immovable property in the Member States, and for certain prudential and supervisory requirements, including for the establishment and supervision of credit intermediaries, appointed representatives and non-credit institutions. 

Specifically the Directive includes requirements on: 

1.Financial education of borrowers 

2.Conduct of business obligations for creditors and credit intermediaries, when providing credit to consumers and the obligation to provide information free of charge to consumers 

3.Information and practices that have to be followed preliminary to the conclusion of the credit agreement, including information that needs to be included in advertising, the specific calculation of the annual Percentage Rate of Charge (APRC), requirement to conduct a creditworthiness assessment and property valuation, and the requirement to disclose and verify consumer information 

4.Access to the data base by other institutions 

5.Advisory services

6.Provisions on foreign currency loans and variable rate loans 

7.Sound execution of credit agreements, including early payment, arrears and foreclosure  
8.Requirements for establishment and supervision of credit intermediaries and appointed representatives

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