Brussels, 21/03/2016 (Agence Europe) - The directive (2014/17) on the granting of mortgage credit in the European Union entered into force on Monday 21 March (see EUROPE 10834).
The legislative text covers mortgage loans for residential use, which may or may not be guaranteed by a mortgage. It aims to create a property credit market at European Union level with a high level of consumer protection.
“This is an important step in improving consumer information and encouraging responsible lending”, said the Commissioner for Financial Services, Jonathan Hill, in a press release. He added that “the EU passport regime for credit intermediaries will increase the sector's competitiveness and should also offer new business opportunities”.
Principally, the directive includes consumer information obligations. It introduces a standard document containing the necessary pre-contractual information, such as the global effective annual rate, in order to help future borrowers to make an enlightened choice and compare offers, even on a cross-border basis. For the first time, consumers will have a cooling-off a period of seven days to reconsider their investments or withdraw from them, without penalty. Any linked sales obliging borrowers to take out specific insurance connected to the mortgage credit from the same establishment will be forbidden. In the event of loans taken out in a foreign currency, transparency will be provided as to the financial risks related to fluctuations in exchange rates. Finally, borrowers will be able to pay off their loans before the initially planned due date. It will come down to the member states to lay down the conditions for this provision and for the granting of compensation to the lender.
The directive also lays down rules for business conduct and staff skills. All lenders must carry out credit checks on consumers in order to be able to offer them appropriate products. Credit intermediaries which fulfil the conditions for eligibility in the member state of origin will have a European passport, allowing them to provide their services within the internal market. (Original version in French by Mathieu Bion)