WRITTEN QUESTION E-1636/01

by Juan Naranjo Escobar (PPE-DE) to the Commission

(12 June 2001)

Subject: Single market in mortgages

The standardisation of rules on mortgages which will take place when the new European code of conduct on loans is adopted will significantly alter the European market in mortgages.

This code, already endorsed by financial institutions and consumers, is now awaiting adoption by the Fifteen, who may submit their comments or amendments.

Can the Commission explain the present state of play on the matter and state whether Member States will be expected to give their approval by a given date, so that we can finally have a single market in mortgages despite the excessive protectionism concerning internal markets being exhibited by some Member States?

Answer given by Mr Bolkestein on behalf of the Commission

(3 September 2001)

The Commission brought together European Credit Sector Associations and European Consumer Organisations in an attempt to have them agree on the terms of a Voluntary Code of Conduct on Pre-Contractual Information for Home Loans. The negotiations were successfully completed, after more than three years, and a Voluntary Code of Conduct was signed by the negotiating parties on 5 March 2001. The Agreement is between industry and consumers and is as such not to be adopted by Member States.

The Commission also gave its political backing to the Voluntary Code of Conduct.

It therefore issued a Recommendation(1) that endorses the Code and invites:

- Lenders offering home loans, regardless of whether they are members of the associations and federations who negotiated the Code, to comply with the Recommendation and, consequently, the Code;

- Member States to take all necessary steps in order that any pre-contractual information laid down in national legislation and additional to the pre-contractual information of the Code may be merged with the information included in the European Standard Information Sheet of the Code in a manner that does not impair comparability across borders.

The aim is to improve consumer protection and to make it easier for consumers to compare the relative merits of similar products offered by different home loan lenders. It lays down the obligation for lenders to provide consumers with general information as to the different types of products offered, the types of interest rate (fixed, variable or combinations thereof), all additional costs associated with taking up mortgage credit, etc It also provides for a personalised breakdown of a consumer's personal liabilities that details the exact amount of each instalment, the total amount that will be paid over the full term of the mortgage, the possibility and conditions for early repayment for the particular mortgage credit formula chosen by the individual consumer, etc. in a standardised document (European Standardised Information Sheet ESIS), that allows the consumer to compare easily between the offers made by different home loan lenders, potentially across borders.

Home loan lenders have six months to register their intention to comply with the Code and up to 12 months to implement the necessary measures. Therefore, adhering home loan lenders should comply with the terms of the Code and the Recommendation no later than 30 September 2002. The same deadline applies to Member States in case they have national legislation including pre-contractual information that has to be merged with the information included in the Standard Information Sheet.

The Commission has set up a central register to keep track of the lenders that notify their adherence to the Recommendation and the Code. This central register will be published on Directorate general Internal Market's website by the end of September 2001.

In a separate yet connected exercise the Health and Consumer Protection Directorate general has entered into early consultation with stakeholders (national experts, representatives of consumers and industry with Parliament committees observing) about a revision of the 1987 Consumer Credit Directive(2). A Discussion Paper is on the DG website(3). One theme is the sustainability of the current distinction between (unsecured) consumer credit and (secured) real estate or mortgage credit/home loans in the light of the increasing role of mortgage-backed consumer credit. The analysis of this problem will be made with the effectiveness of the Code in mind.

(1) C(2001)477 final, on 1.3.2001.

(2) Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, OJ L 42, 12.2.1987.

(3) http://europa.eu.int/comm/consumers/policy/developments/cons_cred/cons_cred1a_en.pdf.