Commission Recommendation of 1 March 2001 on pre-contractual information to be given to consumers by lenders offering home loans (Text with EEA relevance) (notified under document number C(2001) 477)
Date: 2001-03-01
Institutions: European Commission
Subjects: approximation of laws, consumer information, contract, real estate credit

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Official Journal of the European Communities

L 69/25

COMMISSION

COMMISSION RECOMMENDATION

of 1 March 2001

on pre-contractual information to be given to consumers by lenders offering home loans

(notified under document number C(2001) 477)

(Text with EEA relevance)

(2001/193/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the second indent of Article 211
thereof,

Whereas:

(1)

(2)

(3)

Achieving a single market for financial services offering
consumers a high level of protection is a priority for the
Community. Signing a home loan contract is often the
most important financial commitment that a consumer
enters into. Home lending is an area of financial services
where consumers could gain substantial benefit from
increased corss-border activity provided that adequate
protective measures are in place.

It is essential
in that contex that the pre-contractual
information as to the terms and conditions on which
home loans are offered throughout the Community are
transparent and comparable. To that end, lenders should
be invited to provide consumers with two sets of
harmonised information, namely one containing general
information and the other containing personalised infor-
mation. The personalised information should be
provided in a standard written format, known as a Euro-
pean Standardised Information Sheet.

information — both general and
The elements of
personalised — to be given to consumers by lenders,
have been negotiated under the auspices of the Commis-
sion by the associations and federations representing
lenders, on the one hand, and consumers, on the other.
These negotiations have resulted in a Voluntary Code of

Conduct on pre-contractual information for home loans
(the ‘Code’), a copy of which can be obtained from the
adhering lenders. Adherence to the Code is open to all
they are
home loan lenders,
members of one of the negotiating associations and
federations.

regardless of whether

In certain Member States national requirements on addi-
tional pre-contractual consumer information for home
loans already exist. It is desirable that these additional
information elements be merged with those in the Euro-
pean Standardised Information Sheet and that this be
done in a manner that ensures comparability across
borders for the consumer at European level. Where a
Member State imposes on lenders from other Member
States an obligation to give additional pre-contractual
information to consumers above and beyond what is set
it is invited to ensure that this
out in the Annexes,
information is in conformity with Community law.

Both domestic and cross-border home loans should be
subject to this recommendation, excluding credit agree-
ments which are covered by Council Directive 87/
102/EEC of 22 December 1986 on the approximation
of laws, regulations and administrative provisions of the
Member States concerning consumer credit (1), as last
amended by Directive 98/7/EC of the European Parlia-
ment and of the Council (2).

The Commission will establish a central register of
lenders offering home loans, indicating whether or not
those lenders adhere to the Code, as well as the date on
which those lenders notified their adherence to the
Commission. The Commission will, by all appropriate
means, ensure that the public at large can consult this
central register.

The Commission will monitor compliance with this
recommendation and assess
effectiveness. The
Commission will consider presenting binding legislation,
should the terms of this recommendation not be fully
complied with,

its

(4)

(5)

(6)

(7)

(1) OJ L 42, 12.2.1987, p. 48.
(2) OJ L 101, 1.4.1998, p. 17.

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HEREBY RECOMMENDS:

Article 1

Scope

This recommendation covers pre-contractual consumer infor-
mation for domestic and cross-border home loans.

Credit agreements covered by Directive 87/102/EEC are
excluded from the scope of this recommendation.

Article 2

Definition

For the purposes of this recommendation, a home loan means
a credit to a consumer for the purchase or transformation of
the private immovable property he owns or aims to acquire,
secured either by a mortage on immovable property or by a
surety commonly used in a Member State for that purpose.

Article 3

Principles

The lender should supply to the consumer in the course of the
pre-contractual phase:

(a) general

information as set out in Annex I;

(b) personalised information to be presented in a European

Standardised Information Sheet as set out in Annex II.

In addition, the lender should supply to the consumer informa-
tion on the identification, address and telephone number of the
competent body to which the consumer can refer in the event
of difficulties in relation to the application of the Code on
information for home loans.
pre-contractual

The final decision to acept a credit offer from a lender lies with
the consumer.

Article 4

National

requirements on additional pre-contractual

consumer information

Should pre-existing national requirements provide that addi-
tional pre-contractual consumer information is to be given to
the consumer, Member States are invited to take all necessary
steps in order that this additional information may be merged
with the information included in the European Standardised
Information Sheet in a manner that does not impair compar-
ability across borders.

Each Member State is moreover invited to ensure that those
additional nation requirements are imposed on lenders from
other Member States offering home loans in the territory of
that Member State only if those additional requirements are in
conformity with Community law.

In this case, the host Member State is invited to notify the
requirements to the Commission so that the latter can consider
them in the framework of its monitoring activity set out in
Article 6.

Article 5

Establishment of a register by the Commission

The Commission will establish a central register of lenders
offering home loans, indicating whether or not those lenders
adhere to the Code.

Article 6

Monitoring by the Commission

The Commission will monitor
recommendation.

compliance with

this

the
Two years after adoption of
Commission will assess its effectiveness: the assessment will be
based on its own monitoring, on annual progress reports to be
drawn up by the European Credit Sector Associations, and on
any other information available.

recommendation,

this

Article 7

Final provision

in the
Member States and lenders offering home loans
Community, regardless of whether they are members of the
associations and federations who negotiated the Code, are
invited to comply with this recommendation by no later than
30 September 2002.

Article 8

Addressees

This recommendation is addressed to the Member States.

Done at Brussels, 1 March 2001.

For the Commission

Frederik BOLKESTEIN

Member of the Commission

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Initial information about home loans should include or be accompanied by the following information in the same format
as that initial

information is itself provided:

ANNEX I

A. Lender

1. Identification and address of the lender.

2. Where appropriate,

identification and address of the intermediary.

B. Home loan

1. Purposes for which the home loan may be used.

2. Form of surety.

3. Description of the types of home loans available with short description of the differences between fixed and

variable rate products,

including related implications for the consumer.

4. Types of interest rate — fixed, variable, and combination thereof.

5. An indication of the cost of a typical home loan for the consumer.

6. A list of related cost elements, such as, administrative costs, insurance costs, legal costs, intermediaries costs.

7. The different options available for reimbursing the credit to the lender (including the number, frequency, amount

of repayment instalments if any).

8. Whether there is a possibility of early repayment (if so,

its conditions).

9. Whether a valuation of the property is necessary and,

if so, by whom it has to be carried out.

10. General information on tax relief on home loan interest or other public subsidies prevailing, or information on

where one can obtain further advice.

11. The duration of the reflection period, where relevant.

12. Confirmation that the institution subscribes to the Code, and indication that a copy of the Code is available in the

institution.

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ANNEX II

EUROPEAN STANDARDISED INFORMATION SHEET

This standardised information is an integral part of the Voluntary Code of Conduct on pre-contractual information
for home loans, a copy of which can be obtained from your lender.

Item

Description

Up front text

‘This document does not constitute a legally binding offer.

The figures are provided in good faith and are an accurate representation of the offer that the lender would
make under current market conditions based on the information that has been provided. It should be noted,
however, that the figures could fluctuate with market conditions.

The provision of this information does not oblige the lender to grant a credit.’

1. Lender

2. Description of product

This section should provide a brief but clear description of the product.

It should be made clear whether it is a mortgage on a property or another commonly used surety.

It should be made clear whether the product on offer is an interest only home loan (i.e. that it involves
servicing the debt with a lump sum payment at the end) or a repayment home loan (i.e. that it involves
paying interest and capital over the lifetime of the home loan).

It should be made clear whether the home loan terms are dependent on the consumer supplying a certain
amount of capital (perhaps expressed as a percentage of house value).

Where the home loan terms are dependent on a third party guarantee, this should be clearly stated.

3. Nominal rate (indicate type of rate and

duration of fixed period)

This section should provide information on the key conditions of the home loan — the interest rate. Where
relevant, the description should include details of how the interest rate will vary including, for example,
review periods, lock in periods and related penalty clauses, collars and caps, etc.

The description should include:

— whether or not a variable rate is indexed, and
— provide details of indexation, where appropriate.

Where a national figure for APRC is not set in legislation, the equivalent effective rate should be used.

4. Annual percentage rate of charge (APRC)
based on national regulation or effective
rate, where relevant

5. Amount of credit advanced and currency

6. Duration of home loan agreement

7. Number and frequency of payments (may

vary)

8. For repayment home loan, amount of

each instalment (may vary)

9. For interest only home loan:

The lender should provide an indication, real or illustrative, of:

— amount of
payment,

each regular

interest

(a) the amount of each regular interest repayment in accordance with the frequency of the payments (see

point 7);

— amount of each regular payment to

(b) the amount of each regular payment towards the repayment vehicle, in accordance with the frequency

the repayment vehicle.

of the payments (see point 7).

Where appropriate, a warning should be given that the repayment vehicle may not cover the amount
borrowed.

If the lender provides the repayment vehicle and has included this in part of the offer then it should be clear
whether or not the offer is tied to the consumer's agreement on that repayment vehicle.

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Item

Description

10. Additional non-recurring costs, where

applicable

A list of initial non-recurring costs which the consumer is expected to pay upon taking out the home loan
must be provided.

Where these costs are under the direct or indirect control of the lender, an estimate of the costs should be
provided.

Where relevant, it should be made clear if the cost is to be paid regardless of the outcome of the home loan
application.

Such costs might include, for example:

— administrative costs,
— legal fees,
— property valuation.

Where an offer would be dependent on the consumer's receiving these services through the lender
(provided this is permitted in national legislation), it should be clearly stated.

11. Additional recurrent costs (not included

This list should include, for example:

in point 8)

— insurance against default on payments (unemployment/death),
— fire insurance,
— building and contents insurance.

Where an offer would be dependent on the consumer's receiving these services through the lender
(provided this is permitted in national legislation), it should be clearly stated.

12. Early repayment

The lender should provide an indication of:

— the possibility and terms of early repayment,
— including indication of any charges applicable.

13. Internal complaint schemes

Name, address and telephone number of contact point.

Where it is not possible to stipulate the charge at this stage, an indication should be provided that a sum
sufficient to recoup the lender's costs in unwinding the transaction would be payable.

14. Illustrative amortisation table

The lender should provide an illustrative and summarised amortisation table which includes, at least:

— monthly or quarterly payments (if it be the case) for the first year,
— to be followed by yearly figures over the total duration of the loan.

The table should contain figures on

— amount of capital reimbursed,
— amount of interest,
— outstanding capital,
— amount of each instalment,
— sum of capital and interest.

It should be clearly indicated that the table is illustrative only and contain a warning if the home loan
proposed has a variable interest rate.

15. Obligation to domicile bank account and

salary with lender