Modified proposal for a Directive of the European Parliament and of the Council on credit agreements for consumers amending Council Directive 93/13/EC (presented by the Commission pursuant to Article 250(2) of the EC Treaty)
Date: 2005-10-07
Institutions: European Commission
Subjects: approximation of laws, consumer credit, consumer information, consumer protection, contract, cost of borrowing, credit

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.11.2005 
COM(2005) 483 final/2 

2002/0222(COD) 

CORRIGENDUM: Annule et remplace la page de couverture et la première page de l’acte du 
document COM(2005) 483 final, du 7.10.2005. Cette correction concerne les versions 
linguistiques suivantes: CS, DA, EL, EN, ES, ET, FI, HU, IT, LT, LV, MT, NL, PL, PT, SK, 
SL et SV 

Amended proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on credit agreements for consumers amending Council Directive 93/13/EC 

(presented by the Commission pursuant to Article 250(2) of the EC Treaty) 

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EXPLANATORY MEMORANDUM 

1. 

PROCEDURE 

The Commission adopted on 28th October 2004 a modified proposal for a Directive 
on Consumer Credit following the opinion voted by the European Parliament (EP) on 
20 April 2004. 

After the modified proposal was published, the Commission continued consultation 
with Member States and stakeholders. As a result, the Commission concluded that a 
consolidated text would be useful. In addition the consultations showed the need for 
further  substantial  modifications  in  order  to  avoid  unintentionally  burdening 
consumer credit business whilst at the same time ensuring a high level of protection 
for consumers. In particular: 

•  The Forum Group of experts on mortgages set up by the Commission had issued 
its  final  report,  which  contributed  to  the  decision  to  exclude  all  mortgage  credit 
from the scope of the proposal. 

•  The  duty  to  offer  advice  to  the  consumer  in  the  pre-contractual  stage  has  been 

clarified and adapted to the circumstances of the credit offer. 

•  The  flexibility  associated  with  certain  provisions  is  coupled  with  a  mutual 
recognition  clause  aimed  at  ensuring  that  any  differences  in  the  resulting 
transposition will not constitute an obstacle to the internal market. 

2. 

OBJECTIVES 

The Commission has three main objectives in the area of consumer credit:  

– 

– 

– 

establishing the conditions for a genuine internal market,  

ensuring a high level of consumer protection, and  

improving  the  clarity  of  EC  regulation  by  recasting  the  three  existing 
Directives on consumer credit (87/102/CE, 90/88/CE and 98/8/CE).  

These  objectives  are  in  line  with  the  Lisbon  Strategy,  as  the  development  of  an 
internal  market  in  credit  will  increase  the  competitiveness  of  EU  creditors  by 
enhancing competition and promoting product innovation.  

Harmonisation  of  consumer  protection  provisions  in  the  area  of  retail  financial 
services,  coupled  with  targeted  mutual  recognition,  is  a  key  aspect  of  the 
Commission strategy for developing the retail financial services market. The latter is 
a  natural  follow-up  to  the  introduction  of  a  single  currency,  which  removes  the 
exchange rate risk between euro-zone countries and renders price comparisons more 
transparent.  Transfer  costs  between  euro  zone  countries  have  been  considerably 
reduced  following  the  introduction  of  Regulation  2560/2001.  This  will  be 
supplemented  by  further  integration  of  EU  payments  systems,  making  regular 

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payments  throughout  the  euro-zone  as  easy  as  currently  nationally.  Cross-border 
loans, requiring period cross-border repayment stand to especially benefit from these 
developments. 

3. 

AVAILABLE OPTIONS 

The  Consumer  Credit  Directive  87/102/EC,  based  on  minimum  harmonisation, 
resulted  in  Member  States  going  beyond  the  Directive’s  provisions  to  a  different 
extent. As the relevant provisions are mostly of a mandatory nature, these differences 
in  national  legislations  constitute  obstacles  to  the  internal  market  and  dissuaded 
business to offer pan-European products. 

Consequently,  a  legislative  initiative  was  the  only  available  option  to  meet  the 
objectives. 

4. 

IMPACT OF THE DIRECTIVE 

4.1. 

Impact on competitiveness 

•  The market for credit has a potential to develop; only a small part of it is currently 
cross-border.  The  considerable  overall  size  of  the  credit  market  masks  a  large 
diversity between markets, where levels of consumer credit vary considerably. For 
example, while the UK market amounts to some €230 billion, this contrasts with 
just  €40  billion  in  a  similar  sized  country,  Italy.  The  average  use  of  credit  per 
household  varies  largely  as  well1.  In  some  Member  States,  consumer  credit 
accounts  for  a  large  part  of  the  households’  available  income,  in  others  it  is 
relatively  small.2  Some  markets  have  little  potential  to  expand  further,  whereas 
others have still great potential to develop.  

•  The  possibility  to  offer  credit  contracts  throughout  the  EU  should  result  in 
improved efficiencies and economies of scale for banks and a cheaper and wider 
selection  of  products  for  customers.  Lenders  will  be  able  to  design  pan-EU 
consumer credit products, which do not necessarily have to comply with 25 sets of 
domestic rules.  

•  New  business  opportunities  are  arising  to  harness  the  potential  of  the  internal 
market – technology (in particular the Internet) allow consumers and creditors to 
contract at a distance, new demand for credit may arise from the increase in retail 
sales over the Internet, growth in access to Internet is stimulating remote banking. 

4.2. 

Impact on competition 

•  Facilitating access to credit markets may stimulate competition in certain markets 
where at present a few players dominate and consumers enjoy reduced access to 

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From  942€  in  Spain,  3,000€  to  3,500€  in  Belgium,  Germany  or  France,  up  to  9,408€  in  Sweden  and 
almost 18,000€ in the UK (2002 figures). 
From 7% in Greece, 10% in Spain or France, 16% in Germany and Portugal, up to respectively 26% 
and 28% in Sweden and in the UK (2002 figures). 

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credit. Stimulating competition should improve efficiency of credit institutions in 
an increasingly global economy.  

4.3. 

Impact on consumers 

•  Enhanced  competition  and  opening  of  national  markets  to  foreign  creditors  will 
lead to lower interest rates for consumers. Prices of consumer credit vary widely 
according to the creditor and from one Member State to another, and consumers 
should be put in a position to take advantage of offers throughout the EU territory. 

•  Removal  of  barriers  to  competition  will  lead  to  a  broader  range  of  offers  and 
improved products. The level of innovation is already quite high in some Member 
States, however certain credit products available in a given Member State can, in 
many  cases,  not  be  sold  elsewhere  in  the  EU.  It  is  the  interests  of  consumers  to 
have  access  to  all  credit  products  available  in  the  EU,  while  being  guaranteed  a 
high level of information and protection. 

•  Harmonisation  of  certain  key  elements  of  the  consumer  credit  agreement  will 
improve  consumer  confidence  and  encourage  consumers  to  buy  credit  across 
borders  in  the  EU.  The  current  low  level  of  cross-border  consumer  credit 
agreements is also due to concerns regarding the level of consumer protection in 
foreign Member States. 

5. 

MAIN CHANGES COMPARED TO THE MODIFIED PROPOSAL OF 28TH OCTOBER 2004 

5.1. 

Aim 

Article 1 clarifies that only certain aspects of the area are dealt with in the Directive. 
This is in line with the views expressed by various stakeholders in the consultation 
process. 

5.2. 

Definitions 

5.2.1.  Overdrafts 

The question of overdrafts needed clarification. In particular, in order to create legal 
certainty,  the  present  modified  proposal  provides  a  definition  corresponding  to  the 
usual practice in Member States.  

5.2.2.  Total cost of credit 

The definition of the total cost of credit is redrafted in line with the comments of EP 
and industry. The objective is to include only those costs corresponding to services 
concluded with or via the creditor. This definition serves as basis for the calculation 
of the Annual Percentage Rate of Charge (APR). The total lending rate is deleted as 
requested  by  stakeholders  and  the  EP,  as  it  might  have  been  confusing  for 
consumers. 

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5.3. 

Scope 

5.3.1.  Mortgage credit agreements 

The  first  modified  proposal  covered  equity  releases,  while  excluding  credit 
agreements concluded for housing purposes. However, determining the purpose of a 
loan is very difficult for the creditor, if not impossible, as he has no control on the 
use  of  the  money  he  lends.  In  addition,  mortgage  credit  agreements  in  general  are 
very  specific  instruments  with  particular  features  which  require  to  be  addressed 
separately,  irrespective  of  the  purpose  of  the  loan.  Therefore,  the  Commission  has 
excluded  equity  release  from  the  scope,  This  corresponds  to  an  EP  amendment 
strongly supported by industry.  

5.3.2. 

Surety agreements, guarantors 

Surety agreements are now excluded from the scope, as the main issue in relation to 
sureties was linked to the question of mortgage credit. 

Guarantors  are  excluded  from  the  scope  as  well.  The  Directive  deals  with  credit 
agreements  only;  it  is  more  opportune  not  to  deal  with  specific  aspects  of  contract 
law  which  are  regulated  in  a  larger  context  in  the  Member  States.  Both  exclusions 
correspond to EP amendments, and meet concerns put forward by the banking sector.  

5.3.3.  Overdrafts 

The  EP  as  well  as  the  European  banking  industry  have  argued  that  overdrafts  are 
valued for simplicity and low cost, and therefore, need not to be subject to the full 
range of requirements for credit agreements. They are therefore submitted to a light 
regime only. However, a sufficient level of information is necessary. Overdrafts are 
therefore subject to a limited number of contractual information requirements. 

5.3.4.  Agreements above 50 000 € 

Further to discussions with stakeholders, agreements above 50 000 € are excluded as 
they  are  generally  not  concluded  for  consumption  purposes  but  rather  for  housing 
purposes,  and  therefore  do  not  require  the  same  type  of  legislation  as  the  average 
consumer  credit.  A  revision  clause  regarding  the  applicable  thresholds  has  been 
introduced  so  as  to allow for an adjustment of the credit thresholds covered by the 
Directive to the economic trends in the EU and the development of the market.  

5.4. 

Pre-contractual information 

As advertising is already dealt with by the Directive on Unfair Commercial Practices 
(2005/29/EC),  the  Commission  only  proposes  a  list  of  mandatory  information 
elements  to  be  mentioned  in  advertising  containing  financial  information  on  credit. 
General  advertising  on  a  given  credit  service  is  not  concerned,  which  avoids 
unnecessary burden on businesses. 

Pre-contractual  information  allows  consumers  to  compare  offers.  However,  various 
stakeholders  in  the  consultation  process  were  concerned  that  an  excess  of 
information may be confusing. Some pre-contractual information requirements have 
therefore been deleted in the present modified proposal. Further, following requests 

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from the banking sector, the present modified proposal aims at ensuring consistency 
with information requirements in existing EC law.  

The  lender  is  requested  to  assess  the  consumer’s  creditworthiness  on  the  basis  of 
information disclosed by the latter and, where appropriate, consultation of databases. 
Against the background of broad consultation of the banking sector, the Commission 
does  not  perceive  that  this  gives  rise  to  any  additional  costs  for  banks  as  it 
corresponds to good banking practice. 

The concept of a duty to advise was modified. Contrary to some requests from the 
banking  industry,  the  Commission  maintains  the  concept  that  a  creditor  should  not 
merely  fulfil  the  pre-contractual  information  requirements,  but  should  provide 
additional  explanations  in  order  to  enable  the  consumer  to  take  a  well-informed 
decision.  However,  in  response  to  a  request  from  the  banking  sector  and  some 
Member States, it was clarified that the consumer is always responsible for his final 
decision  to  conclude  a  credit  agreement.  Therefore,  the  reference  to  advice  is 
specified  as  a  duty  to  put  the  consumer  in  a  position  to  assess  the  advantages  and 
drawbacks of the loan. In addition, Member States have been given more flexibility 
to adapt their implementation law to the situation on their markets.  

5.5. 

Contractual information 

The  provisions  on  contractual  information  require  mainly  information  already 
provided at the pre-contractual stage plus information on how to exercise the right of 
withdrawal  and  the  right  of  early  repayment.  This  is  in  line  with  usual  good 
professional practice and will not create significant additional costs for creditors. 

In case of a variable rate, the consumer should be informed of significant changes to 
the  borrowing  rate.  However,  it  is  in  practice  impossible  to  inform  him  of  every 
change,  as  in  certain  cases  the  rate  can  change  slightly  every  day.  Therefore,  the 
present  modified  proposal  foresees  that  consumers  should  be  informed  periodically 
and at least immediately in case of a significant change.  

5.6. 

Database access 

The  obligation  to  set  up  national  databases  has  been  deleted,  since  this  would  go 
beyond  the  purpose  of  this  Directive.  Issues  relating  to  data  protection  are  already 
dealt  with  in  the  Data  Protection  Directive  95/46/EC.  Therefore,  the  Commission 
proposes to guarantee only a mutual access to existing private and public databases 
on  a  non-discriminatory  basis,  which  does  not  involve  additional  costs  for  the 
industry as the previous provision but, on the contrary, will help lowering a barrier to 
cross-border consumer credit. 

5.7. 

Right of withdrawal 

The present proposal foresees a possibility for consumers to withdraw from the credit 
agreement  within  14  days.  This  delay  allows  consumers  to  shop  around  after 
conclusion  of  the  agreement  and  possibly  to  find  a  better  offer.  This  provision  is 
intended to enhance competition. It corresponds to existing practice in most Member 
States,  although  the  length  of  the  period  may  vary.  The  length  of  the  withdrawal 
period  corresponds  to  the  Distance  Marketing  Financial  Services  Directive 

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(2002/65/EC). As a consequence, at least for consumer credit agreements which are 
also marketed by distance means, it will not involve additional costs for creditors. 

5.8. 

Linked transactions 

The present proposal foresees that in case of linked transactions, when the consumer 
has a right to withdraw from the purchase agreement, he also has a right to withdraw 
from  the  linked  credit  agreement.  This  provision  aims  at  avoiding  that  consumers 
have to keep a credit even when its very purpose has disappeared. However, the right 
to  withdraw  from  the  credit  does  not  give  a  right  to  withdraw  from  the  purchase 
agreement.  

5.9. 

Early repayment 

The  present  proposal  grants  the  consumer  a  right  to  repay  his  credit  earlier  than 
initially  agreed.  However,  early  repayment  has  a  cost  for  creditors.  Therefore, 
following consultations with stakeholders and Member States, the proposal foresees 
that  creditors  may  charge  fair  and  objective  fees  to  compensate  the  loss.  Since  the 
calculation of the compensation should be made on an objective basis, it is expected 
that this provision would only entail marginal costs for creditors. 

5.10.  Unfair terms 

The proposal contains two examples of unfair terms specific to credit agreements and 
modifies  the  annex  of  Directive  93/13/EEC  on  unfair  terms  in  consumer  contracts. 
The  impact  on  industry,  if  any,  will  be  very  low,  as  the  examples  provided  are  in 
clear contradiction with usual good professional practice. 

5.11.  Harmonisation 

In  general,  both  harmonisation  and  mutual  recognition  have  contributed  to  EU 
market  integration,  while  ensuring  that  consumer  interests  are  taken  into  account. 
The  policy  mix  chosen  in  a  given  area  invariably  depends  on  the  characteristics  of 
that  area  and  should  be  decided  on  a  case-by-case  basis.  Finding  the  right  mix 
requires  an  application  of  the  proportionality  principle  in  designing  a  solution, 
combining where appropriate harmonisation with mutual recognition.  

to  maintain 

this  background, 

the  Commission  suggests 

Against 
the  full 
harmonisation  approach,  with  a  degree  of  flexibility  for  Member  States  in  certain 
areas.  Full  harmonisation  remains  the  optimal  way  to  establish  a  genuine  single 
market  in  consumer  credit  that  allows  businesses  to  offer  consumer  credit  across 
borders while at the same time guaranteeing an appropriate high level of consumer 
protection  regardless  where  a  credit  agreement  is  entered  into  throughout  the  EU. 
The proposal now clarifies that only those elements explicitly dealt with in the text 
are fully harmonised whereas issues such as joint and several liability are left to the 
national legal systems. 

In some cases, the proposal gives leeway to national implementation, mainly due to 
existing heterogeneity as regards national markets or national legislation. This is the 
case, for instance, in the context of early repayment or overrunning. However, it is 
also  necessary  to  ensure  that  the  degree  of  flexibility  provided  for  national 

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implementation  within  the  limits  of  the  Directive  does  not  contribute  to  raise 
additional  barriers  to  the  single  market  in  consumer  credit.  Therefore,  the 
Commission  complements  its  full  harmonisation  approach  with  mutual  recognition 
for a limited number of issues. This helps to reduce burden on businesses who want 
to offer consumer credit across borders. 

As a  result of the  proposed  provision  on mutual recognition, a creditor would only 
have  to  comply,  for  an  activity  in  another  Member  State  than  the  one  he  is 
established in, with legal requirements of its Member State of origin (or equivalent 
ones) and not with those of the host Member State. In the area of contract law, this 
could lead to another result than forseen by Article 5 of the Rome Convention. In an 
Article  5  situation,  which  would  lead  to  the  application  of  the  law  of  the  country 
where the consumer has his habitual residence, this latter law may establish standards 
that, in relation to the equivalent standards applicable in an incoming creditor’s home 
country, restrict that creditors activity, for instance by being higher (or different) than 
his home country standards. In that case, if areas mentioned in the mutual recognition 
clause  are  concerned,  the  host  Member  State  has  to  ensure  that  the  said  standards 
would  not  apply  to  the  contract.  Either  the  law  chosen  by  the  parties,  or,  in  the 
absence of such a choice, the requirements of the creditor’s home country law would 
continue to apply. 

The  areas  concerned  by  the  mutual  recognition  clause  are  explicitly  listed  in  the 
present proposal. As regards Article 15 and 17 on early repayment and overrunning, 
a phasing-in period has been introduced in order to allow Member States to adapt. 

5.12.  Examples 

The illustrative examples for calculation of the APR as foreseen in former Annex II 
of  the  proposal  have  been  deleted  in  view  of  the  Commission’s  overall  target  of 
better  regulation  and  in  order  not  to  over-burden  the  legislative  procedure.  If  these 
examples  are  considered  as  helpful  assistance  in  calculating  the  APR,  they  may  be 
published separately once the Directive is adopted. 

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2002/0222(COD) 

Amended proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the harmonisation of the laws, regulations and administrative provisions of the 
Member States concerning credit agreements for consumers amending Council 
Directive 93/13/EC 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 95 thereof, 

Having regard to the proposal from the Commission3, 

Having regard to the opinion of the European Economic and Social Committee4, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty5 

Whereas: 

(1) 

(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  credit6  lays  down  rules  at  Community  level  concerning  consumer 
credit agreements. 

(1) In 1995, the Commission presented a report7 on the operation of Council Directive 
87/102/EEC of 22 December 1986 on for the approximation of the laws, regulations 
and  administrative  provisions  of  the  Member  States  concerning  consumer  credit, 
following which it and undertook a very broad consultation of the interested parties. 
In 1997,  the  Commissionit  presented  a  summary  report  of  reactions  to  the  1995 
report8.  A  second  report9  was  produced  in  1996  on  the  operation  of  Directive 
87/102/EC,  as  amended  by  Council  Directive  90/88/EEC  of  22  February  1990 
amending  Directive  87/102/EC  on  the  approximation  of  the  laws,  regulations  and 
administrative provisions of the Member States concerning consumer credit. 

3 
4 
5 
6 

7 
8 
9 

OJ C , p. . 
OJ C , , p. . 
Opinion. 
OJ L 42, 12.2.1987, p. 48. Directive as last amended by Directive 98/7/EC of the European Parliament 
and of the Council (OJ L 101, 1.4.1998, p. 17). 
COM(95) 117 final. 
COM(97) 465 final. 
COM(96) 79 final. 

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(3) 

(4) 

(5) 

(6) 

(7) 

(2) Thoese reports and consultations revealed substantial differences between the laws 
of the various Member States in the field of credit for natural persons in general and 
consumer credit in particular. An aAnalysis of the national laws transposing Directive 
87/102/EEC  shows  that  Member  States  have  considered  the  degree  of  protection 
offered by the Directive to be inadequate. They have therefore taken account, in their 
implementing  legislation,  of  other  types  of  credit  and  new  types  of  credit  agreement 
not covered by the Directive. Consequently, it is necessary to anticipate the reforms of 
national legislation envisaged by several Member States and to make provision for a 
harmonised  Community  framework.  use  a  number  of  consumer  protection 
mechanisms, in addition to the Directive 87/102/EEC, on account of differences in 
the legal or economic situation at national level.  

(3) The de facto and de jure situation resulting from those national differences leads to 
distortions  of  competition  among  creditors  in  the  Community  and  obstacles  to  the 
internal  market  where  Member  States  have  adopted  different  mandatory 
provisions more stringent than those foreseen in Directive 87/102/EEC. It restricts 
consumers’  scope  for  ability  to  make  direct  use  of  the  gradually  increasing 
availability  of  cross-border  credit  obtaining  credit  in  other  Member  States.  Those 
distortions and restrictions in turn affect the scale and nature of the demand for cross-
border credit, which may in turn have consequences in terms of the demand for goods 
and services. A further effect of the differences between national laws and practices is 
that consumers do not enjoy the same protection in all Member States.  

(4) In recent years the types of credit offered to and used by consumers have evolved 
considerably.  New  credit  instruments  have  appeared,  and  their  use  continues  to 
develop. It is therefore necessary to adapt, amend and complete the existing provisions 
and to extend their scope, where appropriate. 

In accordance with Article 14(2) of the Treaty, the internal market comprises an 
area without internal frontiers in which the free movement of goods and services 
and  freedom  of  establishment  are  ensured.  The  development  of  a  more 
transparent and efficient credit market within the area without internal frontiers 
is vital to promote the development of cross-border activities.  

In  order  to  facilitate  the  emergence  of  a  well-functioning  internal  market  in 
consumer credit, it is necessary to make provision for a harmonised Community 
framework  in  a  number  of  core  areas.  In  view  of  the  continuously  developing 
market  in  consumer  credit  and  the  increasing  mobility  of  European  citizens, 
forward-looking Community legislation which is able to adapt to future forms of 
credit  and  which  allows  Member  States  the  appropriate  degree  of  flexibility  in 
their implementation should help to establish a modern body of law on consumer 
credit. 

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(8) 

(9) 

(5)  It  is  also  necessary  to  promote  the  creation  of  a  more  transparent  and  efficient 
credit  market.  It  is  important  that  thisthe  market  should  offer  a  sufficient  degree  of 
consumer  protection  such  that  to  ensure  consumer  confidence.  Thus,  the  free 
movement  of  credit  offers  can  take  place  under  optimum  conditions  for  both  those 
who offer credit and those who require it, with due regard to specific situations in 
the individual Member States. 

This necessitates a process of maximum Full harmonisation is necessary in order to 
assure  all  consumers  in  the  Community  of  a  high  degree  of  a  high  and  equivalent 
level  of  protection  of  their  interests  and  an  equivalent  level  of  information.  and  in 
order to create a genuine internal market. Member States should therefore not be 
allowed to maintain or introduce national provisions other than those laid down 
in  this  Directive.  However,  such  restriction  should  only  apply  where  there  are 
provisions  harmonised  in  this  Directive.  Apart  from  the  provisions  harmonised 
by  this  Directive,  Member  States  should  remain  free  to  maintain  or  introduce 
national  legislation.  Accordingly,  Member  States  may,  for  instance,  maintain  or 
introduce national provisions on joint and several liability of the seller or supplier 
of  services  and  the  creditor.  Another  example  of  this  possibility  for  Member 
States  could  be  national  provisions  introducing  or  maintaining  a  right  of 
withdrawal  from  the  contract  of  sale  of  goods  or  supply  of  services  if  the 
consumer exercises his right of withdrawal from the credit agreement. In the case 
of specific credit agreements to which only certain provisions of this Directive are 
applicable, for instance, in the case of overdrafts and certain other specific credit 
agreements,  Member  States  should  remain  free  to  regulate,  in  their  national 
legislation,  such  types  of  credit  agreements  regarding  other  aspects  not 
harmonised by the Directive. 

(10)  Even  in  some  areas  harmonised  by  this  Directive,  national  implementing  rules 
could differ and make it more burdensome for creditors to provide their services 
across  borders.  It  is  appropriate  in  those  cases,  taking  into  account  the  level  of 
harmonisation and of consumer protection ensured by this Directive, and with a 
view  to  a  well-functioning  internal  market,  to  avoid  additional  burdens  on 
creditors,  in  particular  as  regards  the  necessity  to  comply  with  rules  that  go 
beyond  those  of  the  Member  State  where  they  are  established.  Therefore,  the 
principle  of  mutual  recognition  should  apply  in  certain  cases  which  are 
exhaustively  listed  in  this  Directive.  In  those  cases,  the  principle  of  mutual 
recognition  implies  that  the  rules  of  the  law  of  the  Member  State  in  which  the 
consumer  has  his  habitual  residence  are  set  aside  if  its  application  to  a  given 
situation constitutes a restriction of the free circulation of services. 

EN 

11 

   EN 

 
(11) 

(6) 

In certain cases where the principle of mutual recognition applies, this Directive 
provides  for  a  transition  period.  Such  a  period  should  allow  Member  States  to 
gain  sufficient  experience  of  the  functioning  of  implementing  legislation  and  it 
also  should  enable  economic  operators  to  adapt  to  a  new  legal  framework 
following the implementation of this Directive before mutual recognition applies.  

In view of the growing diversity among the types of credit and credit providers, any 
person who provides a creditor with information allowing a consumer to be identified 
and  who  assists  in  the  conclusion  of  a  credit  agreement  for  a  remuneration  must  be 
regarded  as  a  credit  intermediary,  regardless  of  the  form  of  such  remuneration. 
However,  lawyers  and  notaries  should  not,  in  principle,  be  regarded  as  credit 
intermediaries where the consumer contacts them for advice on the scope of a credit 
agreement or if they help to draft or authenticate an agreement, as long as their role is 
limited  to  providing  legal  or  financial  advice  and  they  do  not  direct  their  clients 
towards specific creditors 

(12)  Agreements for the provision on a continuing basis of services or for the supply of 
goods  of  the  same  kind  and  in  the  same  quantity,  where  the  consumer  pays  for 
them  for  the  duration  of  their  provision  by  means  of  instalments,  may  differ 
considerably,  in  terms  of  the  interests  of  contractual  parties  involved,  and  of 
modalities and performance of the transactions, from credit agreements covered 
by this Directive. Therefore, it should be clarified that they are not considered as 
credit agreements for the purposes of this Directive. An example of such types of 
agreement is an insurance contract where the insurance is paid for via monthly 
instalments. 

(13) 

(8) 

(9) 

(7)  Credit  agreements  covering  the  granting  of  credit  for  the  purchase  or 
transformation  of  immovable  property  secured  by  real  estate  should  be  excluded 
from the scope of this Directive. That type of credit is of a very specific nature. and is 
the  subject  of  a  Commission  recommendation  of  1  March  2001  on  pre-contractual 
information to be given to consumers by lenders offering home loans. 

In  view  of  the  risks  to  their  financial  interests,  the  situation  of  natural  persons  who 
stand as guarantors for consumers necessitates specific provisions ensuring a level of 
information and protection comparable to that provided for consumers. 

Council  Directive  84/450/EEC  of  10 September  1984  concerning  misleading 
advertising and comparative advertising10 is intended to provide protection with regard 
to the mention of a figure, cost or rate in advertising or advertising offers relating to a 
credit agreement. It requires such figure, cost or rate to be accompanied by calculation 
details  making  it  possible  to  assess  the  figure  in  the  context  of  all  the  consumer’s 
obligations under a credit agreement 

10 

OJ L 250, 19.9.1984, p. 17. Directive amended by Directive 97/55/EC of the European Parliament and 
of the Council (OJ L 290, 23.10.1997, p.18). 

EN 

12 

   EN 

 
                                                 
(14)  Consumers  should  be  protected  against  unfair  or  misleading  practices,  in 
particular  with  respect  to  the  disclosure  of  information  by  the  creditor,  in  line 
with  Directive  2005/29/EC  of  11  May  2005  of  the  Council  and  of  European 
Parliament concerning unfair business-to-consumer  commercial practices in the 
internal  market  and  amending  Directives  84/450/EEC,  97/7/EC  and  98/27/EC 
(the  Unfair  Commercial  Practices  Directive11).  However,  this  Directive  should 
contain specific provisions on advertising concerning credit agreements as well as 
certain elements of standard information consumers should be provided with in 
order to enable them, in particular, to compare different offers.  

(10) 

In  order  to  ensure  real  consumer  protection,  it  is  necessary  to  adopt  an  approach  to 
unsolicited doorstep selling of credit which is stricter than that laid down in Council 
Directive  85/577/EEC  of  20 December  1985  to  protect  the  consumer  in  respect  of 
contracts negotiated away from business premises12. 

(11)  The provisions of this Directive must apply without prejudice to Directive 95/46/EC of 
the European Parliament and of the Council of 24 October 1995 on the protection of 
individuals with regard to the processing of personal data and on the free movement of 
such  data13.  However,  a  suitable  framework  for  the  collection  and  processing  of 
personal data needed in order to assess the credit risk should be envisaged in certain 
cases. 

(15) 

(14)  So  In  order  that  consumers  can  make  their  decisions  in  full  knowledge  of  the 
facts,  they  must  should  receive  adequate  information,  prior  to  the  conclusion  of  the 
credit agreement, on the conditions and cost of the credit and on their obligations. To 
ensure  absolutethe  fullest  possible  transparency  and  comparability  of  offers,  such 
information  should,  in  particular,  include  the  annual  percentage  rate  of  charge 
(applicable to the credit, illustrated by a representative example, and the total lending 
rateand determined throughout the Community in the same way. As the annual 
percentage rate of charge can at this stage only be indicated through an example, 
such  example  should  be  representative.  Therefore,  it  should  correspond,  for 
instance, to the average duration and total amount of credit granted for the type 
of  credit  agreement  under  consideration  and,  if  applicable,  to  the  goods 
purchased.  When  determining  the  representative  example,  the  frequency  of 
certain  types  of  credit  agreement  in  a  specific  market  should  also  be  taken  into 
account.  

(16)  Consumers  should  be  informed  of  any  additional  costs  that  are  compulsory  for 
obtaining  the  credit  before  the  conclusion  of  the  credit  agreement.  Even  if  the 
amount of such costs cannot be determined in advance, consumers should receive 
adequate information both in advertising and at a pre-contractual stage. 

(17)  For  specific  types  of  credit  agreements,  however,  it  is  appropriate,  in  order  to 
ensure at the same time an adequate level of consumer protection without putting 
an  excessive  burden  on  creditors  or,  where  applicable,  credit  intermediaries,  to 

11 
12 
13 

OJ L 149, 11.6.2005, p. 22. 
OJ L 372, 31.12.1985, p. 31. 
OJ L 281, 23.11.1995, p. 31. 

EN 

13 

   EN 

 
                                                 
restrict  the  pre-contractual  information  requirements  of  this  Directive,  taking 
into account the specific character of such types of agreements. 

(18)  The  consumer  needs  to  be  informed  comprehensively  before  he  concludes  the 
credit agreement regardless of whether or not a credit intermediary is involved in 
the  marketing  of  the  credit.  Therefore, 
in  general,  the  pre-contractual 
information  requirements  should  also  apply  when  a  credit  intermediary  is 
involved. However, if suppliers of goods and services act as credit intermediaries 
in an ancillary capacity, it is not appropriate to also burden them with the pre-
contractual  information  requirements  as  laid  down  in  this  Directive.  Therefore, 
the  pre-contractual  information  requirements  should  not  apply  to  such  credit 
intermediaries. Suppliers of goods and services may be considered, for example, 
as acting as credit intermediaries in an ancillary capacity if their activity as credit 
intermediaries does not amount to a substantial part of their turnover. In those 
cases, full pre-contractual information of the consumer is still ensured because it 
has to be provided by the creditor. 

(19)  Consumers  should  also  act  with  prudence  and  respect  their  contractual 

obligations. 

(15) 

In view of the technical and legal complexity of credit instruments, it is necessary to 
impose a general obligation on the credit intermediary and creditor to provide advice 
so  that  the  consumer  can  choose  in  full  knowledge  of  the  facts  among  the  types  of 
credit offered. Similarly, it is the responsibility of the creditor, in accordance with the 
principle  of  “responsible  lending”,  to  check  whether  the  consumer  and,  where 
applicable, the guarantor are in a position to meet new commitments.  

(20)  Despite  the  pre-contractual  information  to  be  provided,  the  consumer  may  still 
need additional assistance in order to decide which credit agreement, within the 
range of  products proposed, is the  most appropriate for his needs and financial 
situation.  Therefore,  Member  States  should  ensure  that  creditors,  and  where 
applicable,  credit  intermediaries,  provide  such  assistance.  Where  appropriate, 
the  relevant  pre-contractual  information,  as  well  as  the  advantages  and  the 
disadvantages associated with the products proposed, should be explained to the 
consumer in a personalised manner, in the light of the possible complexity of the 
relevant credit agreement. 

EN 

14 

   EN 

 
(21) 

(22) 

(13) 

(12)  In  order  to  help  reduce  the  credit  risk  for  both  the  creditor  and  the  consumer, 
experience and practice testify to the benefits of sufficient and reliable information on 
cases of default. Member States must therefore ensure that there is a public or private 
central  database  in  their  territory,  where  appropriate  in  the  form  of  a  network  of 
databases. Consumers and guarantors in the Member State who have defaulted should 
be registered in this database or network. With a view to working effectively, creditors 
must be obliged to consult this central database before accepting any commitment on 
the part of the consumer or guarantor. To prevent any distortion of competition among 
creditors, it must should be ensured that persons and businessescreditors have access 
to  theprivate  or  public  centraldatabases  concerning  consumers  in  a  of  another 
Member  State  where  they  are  not  established  under  the  samenon-discriminatory 
conditions  compared  to  as  persons  and  businessescreditors  in  that  Member  State, 
either directly or through the central database of their own Member State. 

In  order  to  enable  the  consumer  to  know  his  rights  and  obligations  under  the 
credit  agreement,  it  should  contain  all  necessary  information  in  a  clear  and 
concise manner.  

In order to ensure the confidentiality of information and protection of personal data, it 
is  essential  that  the  data  obtained  may  be  used  solely  to  assess  the  risk  of  non-
performance for the consumer or guarantor. Any other processing or use of personal 
data  obtained  through  the  central  database  must  be  prohibited.  Finally,  to  avoid  any 
risk,  the  data  must  be  destroyed  immediately  after  the  conclusion  of  the  credit 
agreement or the refusal of the application for credit. 

(16)  The  conditions  laid  down  in  a  credit  agreement  may  in  some  cases  be  to  the 
consumer’s  disadvantage.  Better  consumer  protection  must  be  ensured  by  imposing 
specifying  certain  conditions  which  apply  to  all  the  forms  of  credit  covered  by  the 
Directive.  The  credit  agreement  must  confirm  and  add  to  the  information  provided 
before  the  conclusion  of  the  agreement,  where  appropriate  with  the  help  of  an 
amortisation table and details of the charges for defaulting. 

(23) 

(24) 

In  order  to  ensure  full  transparency  the  consumer  should  be  provided  with 
information  on  the  borrowing  rate,  both  at  a  pre-contractual  stage  and  when 
concluding  the  credit  agreement.  During  the  contractual  relationship,  the 
consumer  further  should  be  informed  of  significant  changes  to  the  borrowing 
rate.  

(18) In order to approximate the procedures for exercising the right of withdrawal in 
similar  areas,  it  is  necessary  to  make  provision  for  a  right  of  withdrawal  without 
penalty  and  with  no  obligation  to  provide  justification,  under  conditions  similar  to 
those provided for by the Directive 2002/65/EC of the European Parliament and of the 
Council  of  23  September  2002{…}  onconcerning  the  distance  marketing  of 
consumer  financial  services  and  amending  Council  Directives  90/619/EEC,  97/7/EC 
and  98/27/EC14.  Before  exercising  the  right  of  withdrawal,  the  consumer  may 
inform  the  creditor  of  his  intention  to  withdraw  from  the  credit  agreement,  in 
order to allow for re-negotiation of that agreement. 

14 

OJ L 271, 9.10.2002, p. 16. 

EN 

15 

   EN 

 
                                                 
(25) 

(26) 

(27) 

In the case of linked agreements a relationship of interdependence exists between 
the  purchase  of  goods  or  services  and  the  credit  agreement  concluded  for  this 
purpose.  Therefore,  the  exercise  of  the  right  of  withdrawal  in  respect  of  the 
purchase agreement should allow the consumer to withdraw also from the credit 
agreement.  In  addition,  consumers  should  be,  under  certain  conditions,  allowed 
to  pursue  remedies  against  the  creditor  in  case  of  difficulties  related  to  the 
purchase  agreement.  However,  the  non-compliance  with  such  conditions  should 
not  deprive  consumers  of  their  rights  granted  by  national  provisions  applying 
joint and several liability of the seller or supplier of services and the creditor. 

(21)  The  consumer  should  have  the  right  to  discharge  his  obligations  before  the  due 
date in the credit agreement. In the case of early repayment, either in part or in full, 
the creditor mustshould be entitled to claim only a fair and objective indemnity. The 
objective indemnity should compensate the creditor for the costs directly linked 
to  the  early  repayment  and  should  take  into  account  the  interests  of  both 
contractual parties.only, and provided that such repayment results in a corresponding 
financial loss for the creditor.  

(23) The transfer of the creditor’s rights under a credit agreement mustshould not have 
the effect of placing the consumer or guarantor in a less favourable position. For the 
same reasons a creditor who offers a credit agreement providing constitution of capital 
must assume the risk if the third party providing such constitution of capital defaults 
on  his  obligations.  The  consumer  should  also  be  properly  informed  when  the 
credit agreement is assigned to a third party. However, where the assignment is 
effected  for  securitisation  purposes  only  and  where  the  initial  creditor  is,  in 
agreement  with  the  assignee,  acting  as  a  creditor  vis-à-vis  the  consumer,  the 
consumer  does  not  have  an  important  interest  to  be  informed  about  the 
assignment. Therefore, a requirement at EU level to inform the consumer about 
the  assignment  in  such  cases  would  be  excessive,  but  Member  States  should 
remain  free  to  maintain  or  introduce  such  requirements  in  their  national 
legislation. 

EN 

16 

   EN 

 
(28) 

(19)  In  order  to  promote  the  establishing  and  functioning  of  the  internal  market  and 
ensure  a  high  degree  of  protection  for  consumers  throughout  the  Community,  it  is 
necessary  to  fine-tune  the  method  of  calculating  theensure  the  comparability  of 
information  relating  to  annual  percentage  rates  of  charge  throughout  the 
Community.  Despite  the  uniform  mathematical  formula  for  calculating  the 
annual  percentage  rate  of  charge  provided  for  in  Directive  87/102/EEC,  as 
amended  by  Directive  98/7/EC,  the  annual  percentage  rate  of  charge  is  not  yet 
fully  comparable  throughout  the  Community.  In  individual  Member  States 
different  cost  factors  are  taken  into  account  in  the  calculation  thereof.  The 
Directive should therefore clearly define the total cost of a credit to the consumer. 
The costs associated with an insurance should only be included in the calculation 
of the annual percentage rate of charge if the insurance is compulsory in order to 
obtain  the  credit  or  the  advertised  interest  rate  and  is  concluded  with  or  via 
either the creditor or the credit intermediary. and to determine the components in 
the total cost of the credit to be used in the calculation. The annual percentage rate of 
charge  is  in  fact  an  instrument  of  comparison  allowing  the  consumer  to  gauge  and 
compare the impact on his budget, in time and space, of commitments resulting from 
the conclusion of a credit agreement. The total cost of the credit must therefore include 
all  costs  which  the  consumer  is  required  to  pay  for  the  credit,  regardless  of  whether 
those  costs  are  payable  to  the  creditor,  the  credit  intermediary  or  any  other  party. 
Accordingly, even if the consumer voluntarily takes out insurance on concluding the 
credit agreement, the costs associated with such insurance must be included in the total 
cost of the credit. 

(29) 

(20) 

(22) 

(17) In view of the specific nature of the terms used in credit and surety agreements, 
clarification  is  needed  as  to  which  terms  are  should  be  regarded  as  unfair  without 
prejudice to the application to the agreement as a whole in the framework of Council 
Directive  93/13/EEC  of  5 April  1993  on  unfair  terms  in  consumer  contracts15.  That 
Directive should therefore be amended accordingly. 

It  is  also  necessary  to  provide  the  consumer  with  information,  in  the  form  of  a  total 
lending  rate,  on  the  sums  payable  to  the  creditor,  excluding  those  payable  to  third 
parties.  This  rate  allows  the  consumer  to  compare  the  costs  specific  to  a  creditor  in 
respect  of  the  various  products  he  offers  and  the  various  products  available  on  the 
market 

If the supplier of goods or services acquired under a credit agreement can be regarded 
as  a  credit  intermediary,  the  consumer  must  be  able  to  enforce  rights  against  the 
creditor which go further than his normal contractual rights against a supplier of goods 
or services 

(24) 

It is necessary to establish common provisions on measures which apply in the event 
of  non-performance  of  credit  agreements.  In  particular,  certain  debt  collection 
practices which are manifestly out of proportion must be considered illegal. 

15 

OJ L 95, 21.4.1993, p. 29. 

EN 

17 

   EN 

 
                                                 
(30) 

(26) 

(31) 

(32) 

(33) 

(34) 

(25)  In  order  to  ensdure  market  transparency  and  stability,  and  pending  further 
harmonisation,  Member  States  need  to  adoptshould  ensure  that  appropriate 
measures  for  the  registration  of  persons  offering  credit  or  acting  as  regulation  or 
supervision  of  creditors  and  credit  intermediaries  are  in  placewith  a  view  to  the 
conclusion  of  credit  agreements,  for  the  inspection  or  monitoring  of  creditors  and 
intermediaries,  and  for  enabling  consumers  to  lodge  complaints  concerning  credit 
agreements or conditions. 

In  order  to  ensure  permanent  protection  of  the  interests  of  the  consumer,  credit  or 
surety agreements should not derogate, to the detriment of the consumer or guarantor, 
from the provisions implementing or corresponding to this Directive. 

(27) This Directive respects fundamental rights and observes the principles recognised 
in  particular  by  the  Charter  of  Fundamental  Rights  of  the  European  Union.  In 
particular, it aims this Directive seeks to ensure full compliance with respect for the 
rules  on  protection  of  personal  data,  the  right  to  property,  non-discrimination, 
protection  of  family  and  professional  life,  and  consumer  protection  pursuant  to 
Articles 8, 17, 21, 33 and 38 of the Charter of Fundamental Rights of the European 
Union. 

(28) Since the objective of the action to be takenthis Directive, namely to establish 
common  rules  allowing  the  harmonisation  offor  certain  aspects  of  the  laws, 
regulations and administrative provisions of the Member States concerning consumer 
credit,  cannot  be  adequately  sufficiently  achieved  by  the  Member  States,  and  can 
therefore be better achieved more effectively at Community level, the Community can 
take  action  may  adopt  measures  in  accordance  with  the  principle  of  subsidiarity 
referred  to  as  set  out  in  Article  5  of  the  Treaty.  In  accordance  with  the  principle  of 
proportionality, as referred to in the said set out in that Article, this Directive does not 
go beyond what is necessary in order to achieve theose objectives. 

(29) The Member States must should lay down rules on penalties for applicable to 
infringements  of  the  provisions  of  this  Directive  and  must  ensure  that  they  are 
implemented.  enforced.  Theose  penalties  must  be  effective,  proportionate  and 
dissuasiveconstitute a deterrent.  

(30)  Accordingly,  taking  account  of  the  number  of  amendments  that  need  to  be 
made to Directive 87/102/EEC due to the evolution of the consumer credit sector 
and in the interests of clarity of Community legislation, that Directive should be It 
is therefore necessary to repealed and replaced by this Directive 87/102/EEC, 

HAVE ADOPTED THIS DIRECTIVE: 

EN 

18 

   EN 

 
CHAPTER I 
AIM, DEFINITIONS AND SCOPE  

Article 1 
Aim Subject matter 

The aimpurpose of this Directive is to harmonise certain aspects of the laws, regulations and 
administrative  procedures  of  the  Member  States  concerning  agreements  covering  credit  for 
granted to consumers and surety agreements consumers. 

1. 

2. 

Article 3 2 
Scope 

This Directive appliesshall apply to credit agreements and surety agreements. 

This  Directive  shall  not  apply  to  the  following  credit  agreements  and,  where 
applicable, any corresponding surety agreements: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

credit  agreements  the  aim  of  which  is  to  grant  credit  for  the  purchase  or 
transformation  of  private  immovable  property  that  the  consumer  owns  or  is 
seeking to acquire and which are secured either by a mortgage on immovable 
property  or  by  another  comparable  surety  commonly  used  in  a  Member 
Statefor this purpose; 

credit  agreements  involving  a  total  amount  of  credit  exceeding  EUR  50 
000; 

hiring agreements, except where they stipulate that the title is to pass to the 
hirer  eventually;which  exclude  the  passing  of  the  title  to  the  hirer  or  to 
persons entitled by him; 

leasing  agreements  which  do  not  create  any  obligation  to  purchase  the 
object of the agreement; 

credit agreements under the terms of which the consumer is required to repay 
the credit by means of instalments or in a single payment within a period not 
exceeding three months, without the payment of interest or any other charges; 

credit  agreements  which  meet  the  following  conditions:i)are  granted  by  an 
employer to his employees as a secondary activity free of interest or they 
are granted by the creditor as a secondary activity, i.e. outside the sphere of his 
principal commercial or professional activity, 
they  are  granted  at 
annual percentage rates of charge lower than those prevailing on the market, 

ii) 

iii) 

theytheyand which are not offered to the public generally; 

EN 

19 

   EN 

 
(g) 

credit  agreements  concluded  with  investment  firms  within  the  meaning  of  as 
defined in point (2) of Article 1(2) of Council Directive 93/22/EEC16 for the 
purposes  of  allowing  an  investor  to  carry  out  a  transaction  relating  to  one  or 
more  of  the  instruments  listed  in  Section  B  of  the  Annex  to  that  Directive, 
where the firm granting the credit is involved in such transaction; 

(h) 

credit agreements which are the outcome of a settlement reached in court 
or before another statutory authority;  

(i) 

(j) 

(k) 

credit agreements which relate to the deferred payment, free of charge, of 
an existing debt; 

credit agreements upon the conclusion of which the consumer is requested 
to deposit an item as security in the creditor’s safe-keeping and where the 
liability of the consumer is strictly limited to that pledged item; 

credit  agreements  which  relate  to  loans  granted  to  a  restricted  public,  at 
lower interest rates than those prevailing on the market or free of interest, 
and where the creditor is fulfilling a statutory duty with a general interest 
purpose. 

In  the  case  of  credit  agreements  on  the  basis  of  which  credit  is  granted  in  the 
form of an overdraft facility, only Articles 1 to 4, 6, 7, and 8, Article 9(1), Article 
9(2)(a)  to  (d),  (h)  and  (o),  Article  9(3),  Articles  10  and  11,  Article  17  (1),  and 
Articles 18 to 29 shall apply.  

The  information  to  be  included  in  those  credit  agreements  shall  also  contain 
information on the charges applicable from the time such credit agreements are 
concluded, and the conditions under which those charges may be amended. 

In the case of the following credit agreements, only Articles 1 to 4, 6, 7 and 8, 
Article 9 (1), Article 9(2) (a) to (g) and (j), Article 9(3), and Articles 10, 12 and 
17 to 29 shall apply:  

(a) 

(b) 

credit  agreements  involving  a  total  amount  of  credit  not  exceeding  EUR 
300; 

credit  agreements  concluded  by  non-profit  associations  of  consumers 
which  manage  the  savings  of  and  provide  sources  of  credits  to  their 
members, where: 

(i) 

the ultimate responsibility lies with volunteers who provide credit on 
the basis of an annual percentage rate of charge which is subject to a 
ceiling laid down by national law; and  

(ii)  membership of such associations is restricted to persons residing or 
employed in a particular district or employees and retired employees 
of a particular employer; 

3. 

4. 

16 

OJ L 141, 11.6.1993, p. 27. 

EN 

20 

   EN 

 
                                                 
(c) 

credit  agreements  which  provide  for  arrangements  to  be  agreed  by  the 
creditor  and  the  consumer  in  respect  of  deferred  payment  or  repayment 
methods,  where  the  consumer  is  already  in  default  on  the  initial  credit 
agreement] where: 

(i) 

such  arrangements  would  be  likely  to  avert  the  possibility  of  legal 
proceedings concerning such default; and  

(ii) 

the consumer would not thereby be subject to less favourable terms 
compared to the initial credit agreement. 

However, if the credit agreement falls within the scope of paragraph 3, only the 
provisions provided for in that paragraph shall apply. 

For the purpose of this Directive, the following definitions shall apply: 

Article 2 3 
Definitions 

(a) 

(b) 

(c) 

(d) 

(e) 

“consumer” means a natural person who, in transactions covered by this Directive, is 
acting  for  purposes  which  can  be  regarded  as  are  outside  his  trade,  business  or 
profession; 

“creditor” means a natural or legal person who grants or promises to grant credit in 
the course of his trade, business or profession; 

“credit  agreement”  means  an  agreement  whereby  a  creditor  grants  or  promises  to 
grant to a consumer credit in the form of a deferred payment, loan or other similar 
financial accommodation; except for aAgreements for the provision on a continuing 
basis of services (private  or public), or for the supply of goods of the same kind 
and  in  the  same  quantity,  where  the  consumer  has  the  right  to  pays  for  them  for 
such services or goods for the duration of their provision by means of instalments, 
are not deemed to be credit agreements for the purposes of this directive; 

“overdraft  facility”  means  a  credit  agreement  whereby  a  creditor  grants  to  a 
consumer the possibility to dispose of funds in his current account which exceed 
the  current  balance  in  that  account  and  where  the  amount  of  credit  has  to  be 
repaid within three months or on demand; 

“credit intermediary” means a natural or legal person who on behalf of the creditor 
and  for  a  fee,  which  may  take  a  pecuniary  form  or  any  other  agreed  form  of 
financial consideration, habitually: 

(i) 

acts  as  an  intermediary  by  presenting  presents  or  offering  offers  credit 
agreements; 

(ii)  undertaking  undertakes  other  preparatory  work  for  creditsuch  agreements 

other than that referred to in (i); or  

(iii)  concluding  concludes  credit  such  agreements;  the  fee  may  take  the  form  or 

any other agreed form of financial consideration;  

EN 

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(e) 

(f) 

(f) 

(g) 

(i) 

(j) 

(h) 

(h) 

(i) 

(j) 

(k) 

“surety  agreement”  means  an  ancillary  agreement  concluded  by  a  guarantor  and 
guaranteeing or promising to guarantee the fulfilment of a credit agreement granted 
to a consumer and covered by this directive;any form of credit granted to natural or 
legal persons; 

“guarantor” means a consumer concluding a surety agreement; 

“total  cost  of  the  credit  to  the  consumer”  means  all  the  costs,  including  borrowing 
interest, indemnities,commissions and any kind of fees.taxes and any other kind of 
charge  which  the  consumer  has  to  pay  for  the  creditin  connection  with  the  credit 
agreement  in  conformity  with  the  terms  thereof,  and  which  are  known  to  the 
creditor; costs relating to ancillary services relating to the credit agreement, in 
particular  insurance  premiums,  are  included  if  the  conclusion  of  the  service 
contract  is  compulsory  for  obtaining  the  credit  or  the  advertised  interest  rate, 
and  is  concluded  with  the  creditor  or  with  a  third  party,  if  the  creditor,  or, 
where  applicable,  the  credit  intermediary  have  concluded  it  on  behalf  of  this 
third party or have presented the offer or the service as such to the consumer; 
costs payable by the consumer on conclusion of the credit agreement to persons 
other than the creditor or the credit intermediary, in particular a notary or tax 
authorities, are excluded; 

“annual percentage rate of charge” means the total cost of the credit to the consumer 
expressed as an annual percentage of the total amount of credit granted; 

“sums  levied  by  the  creditor”  means  all  the  mandatory  costs  associated  with  the 
credit agreement and paid to the creditor by the consumer; 

“total  lending  rate”  means  the  sums  levied  by  the  creditor  expressed  as  an  annual 
percentage of the total amount of credit; 

“borrowing  rate”  means  the  interest  rate  expressed  as  a  fixed  or  variable  periodic 
percentage  applied  for  a  given  period  to  the  amount  of  credit  drawn  dowm 
drawdowns under the credit agreement; 

“residual  value”  means  the  purchase  price  of  the  financed  goods  applicable  at  the 
time when the purchase option or the property transfer option is exercised; 

“drawdown” means an amount of credit made available to the consumer in the form 
of a deferred payment, loan or other similar financial accommodation under a credit 
agreement; 

“total amount of credit” means the ceiling or the sum of all drawdowns that are likely 
to be agreed; 

“durable  medium”  means  any  instrument  which  enables  the  consumer  to  store 
information  addressed  personally  to  him  in  a  way  which  makes  it  accessible  for 
future reference for a period of time adequate for the purposes of the information and 
which allows the unchanged reproduction of the information stored; 

EN 

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(p) 

“third  party  providing  constitution  of  capital”  means  any  natural  or  legal  person, 
other  than  the  creditor  or  consumer,  who  gives  the  consumer  or,  where  applicable, 
the creditor an undertaking, through an agreement appended to the credit agreement, 
to constitute the capital to be repaid under such credit agreement. 

(l) 

“linked credit agreement” means a credit agreement where 

(i) 

(ii) 

the  credit  in  question  serves  exclusively  to  finance  an  agreement 
concerning the supply of goods or the provision of a service and 

those two agreements form from an objective point of view a commercial 
unit; a commercial unit is involved where the supplier or service provider 
himself finances the credit for the consumer or, if it is financed by a third 
party, if the creditor uses the services of the supplier or service provider in 
connection with the conclusion, or preparation, of the credit agreement, or 
if the credit agreement makes reference to the specific goods or services to 
be financed with the credit. 

EN 

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CHAPTER II 
INFORMATION AND PRACTICES PRELIMINARY TO THE FORMATIONCONCLUSION 
OF THE CREDIT AGREEMENT 

Article 4 
Advertising 

Without prejudice to Council Directive 84/450/EEC, any advertising or any offer displayed at 
business premises that includes information on credit agreements, in particular as regards the 
borrowing rate, total lending rate and annual percentage rate of charge, shall be provided in a 
clear  and  comprehensible  manner,  with  due  regard,  in  particular,  to  the  principles  of  good 
faith in commercial transactions. The commercial purpose of this information must be made 
clear 

1. 

2 

3. 

4. 

5. 

Article 4 
Standard information for advertising 

Any advertising concerning credit agreements indicating an interest rate or any 
figures relating to the cost of the credit to the consumer shall include standard 
information in accordance with this Article (‘the standard information’).  

The standard  information  shall include, in the following order, and in a clear, 
concise and prominent way through a representative example: 

(a) 

the total amount of credit; 

(b) 

the annual percentage rate of charge; 

(c) 

the duration of the credit agreement; 

(d) 

the amount, number and frequency of payments to be made; and  

(e) 

any  kind  of  fees  in  connection  with  the  credit  agreement  in  conformity 
with the terms thereof and which are known to the creditor. 

Where  credit  terms  are  not  available  to  the  general  public,  the  annual 
percentage rate of charge shall be stated by means of at least two representative 
examples. 

Where a lower interest rate is offered for a limited duration at the beginning of 
the  credit  agreement,  the  advertisement  shall  contain  the  annual  percentage 
rate of charge calculated on the total duration of the credit agreement. 

Where the conclusion of a contract regarding an ancillary service relating to the 
credit  agreement,  in  particular  an  insurance,  is  compulsory  for  obtaining  the 
credit  or  the  advertised  interest  rate,  and  its  cost  cannot  be  determined  in 
advance,  the  obligation  to  take  out  this  service  shall  also  be  mentioned  in  a 
clear, concise and prominent way, together with the annual percentage rate of 
charge. 

EN 

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6. 

This Article shall be without prejudice to Directive 2005/29/EC of 11 May 2005 

Article 5 

Ban on negotiation of credit and surety agreements outside business premises 

The  negotiation  of  a  credit  or  a  surety  agreement  outside  business  premises  in  the 
circumstances referred to in Article 1 of Council Directive 85/577/EEC shall be prohibited. 

Article 6 5  
Exchange of information in advance and duty to provide advicePre-contractual information 

1. 

2. 

Without  prejudice  to  the  application  of  Directive  95/46/EC,  and  in  particular 
Article 6  thereof,  the  creditor  and,  where  applicable,  the  credit  intermediary  may 
request  of  a  consumer  seeking  a  credit  agreement,  and  any  guarantor,  only  such 
information as is adequate, relevant and not excessive, with a view to assessing their 
financial situation and their ability to repay.The consumer and guarantor shall reply 
accurately and in full to any such request for informationThe creditor and, where 
applicable,  the  credit  intermediary  shall adhere  to  the  principle  of  responsible 
lending. Therefore, the creditor and, where applicable, the credit intermediary, 
shall comply with their obligations concerning the provision of pre-contractual 
information  and  the  requirement  for  the  creditor  to  assess  the  consumer’s 
creditworthiness  on  the  basis  of  accurate  information  provided  by  the  latter, 
and, where appropriate, on the basis of a consultation of the relevant database. 

Where  the  credit  agreement  allows  the  creditor  to  change  the  total  amount  of 
credit  after  the  date  of  conclusion  of  the  credit  agreement,  the  creditor  shall 
update  the  financial  information  at  his  disposal  concerning  the  consumer  and 
shall  assess  the  consumer’s  creditworthiness  before  any  significant  increase  in 
the total amount of credit. 

In  good  time  before  the  consumer  is  bound  by  any  credit  agreement  or  offer, 
Tthe  creditor  and,  where  applicable,  the  credit  intermediary  shall  provide  the 
consumer  ,  on  paper  or  on  another  durable  medium,  with  the  necessary  and 
essential  information  needed  for  the  conclusion  of  the  credit  agreement  under 
consideration..the consumer with all the exact and complete information needed in 
respect of the credit agreement under consideration. The consumer shall receive this 
information  on  paper  or  on  another  durable  medium  before  the  conclusion  of  the 
credit agreement.  

Without  prejudice  to  Article  5  of  Directive  .../.../EC  [on  the  distance  marketing  of 
financial  services  to  consumers  and  amending  Council  Directives  90/619/EEC, 
97/7/EC  and  98/27/EC],  the  That  information  provided  must  shall  include  a  clear 
concise  and  concise  clear  description  of  the  productits  advantages,  and  any 
drawbacks. In particular tThe information must shall refer to: 

(a) 

the duration of the credit agreement; 

EN 

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(b) 

the  total  amount  of  credit  and  the  conditions  governing  the  drawdown  of  the 
credit; 

(c)  where applicable, the borrowing rate, the conditions governing the application 
of  theis  borrowing  rate  and,  where  available,  any  index  or  reference  rate 
applicable to the initial borrowing rate, as well as the periods, conditions and 
procedure for varying the borrowing rate; 

(d) 

(e) 

(f) 

the  annual  percentage  rate  of  charge  and  the  total  lending  rateand  the  total 
cost  of  the  credit  to  the  consumer,  by  means  of  a  representative  example 
mentioning  all  the  financial  data  and  assumptions  used  for  calculating  theis 
said rates;  

the  amount,  number  and  frequency  of  payments  to  be  made,  where  possible 
set out in a payment schedule;  

the  recurrent  and  non-recurrent  charges,  including  additional  non-recurring 
costs which the consumer has to pay on concluding a credit agreement, such as 
taxes, administrative  costs,  legal  fees and assessment costs with regard to the 
sureties  required  where  applicable,  the  costs  of  maintaining  an  account 
recording both payment transactions and drawdowns, the costs of using a 
means  of  payment  for  both  payment  transactions  and  drawdowns,  and 
other costs relating to payment transactions; 

(f)  where  applicable,  the  cash  price  of  the  financed  goods  or  services,  the  down 

payment due and the residual value;  

(g) 

(h) 

costs  payable  by  the  consumer  on  conclusion  of  the  credit  agreement  to 
persons other than the creditor or the credit intermediary, in particular a 
notary or tax authorities; 

the  obligation  to  take  out  an  ancillary  service  relating  to  the  credit 
agreement, in particular an insurance, where the conclusion of a contract 
regarding  this  service  is  compulsory  for  obtaining  the  credit  or  the 
advertised interest rate, and its cost cannot be determined in advance,  

(i) 

the interest in the case of overdue payments as applicable at the time when 
the information according to this provision is given and the arrangements 
for their adjustment, and the charges for defaulting; 

(j) 

the sureties and insurance required;  

(k) 

(l) 

the  existence or absence of a  right  of  withdrawal, the period during which 
thate right of withdrawal may be exercised; 

the  right  of  early  repayment,  and,  where  applicable,  the  costs  arising 
therefrom, indicating the amount or the calculation method; 

(m) 

the  right  to  be  informed  of  the  result  of  a  database  consultation  for  the 
assessment of the creditworthiness in accordance with Article 8(2); 

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26 

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3. 

4. 

5. 

However,  in  the  cases  of  voice  telephony  communications,  as  referred  to  in 
Article 3(3)  of  Directive  2002/65/EC,  theis  pre-contractual  information  mustshall 
include  at  least  the  items  referred  to  in  points  (b),  (c),  and  (e),  and  g)  of  this 
paragraph and the annual percentage rate of charge by means of a representative 
example and the total cost of the credit to the consumer. 

The  obligation  to  provide  pre-contractual  information  to  the  consumer  in 
accordance with this paragraph may also be discharged by supplying a copy of 
the draft credit agreement including the information in accordance with Article 
9. 

The  requirements  provided  for  in  paragraph  2  shall  be  fulfilled  immediately 
after  the  conclusion  of  the  credit  agreement,  if  that  agreement  has  been 
concluded at the consumer’s request using a means of distance communication 
which does not enable providing the information in accordance with paragraph 
2. 

In the case of a credit agreement where payments made by the consumer do not 
give  rise  to  an  immediate  corresponding  amortisation  of  the  total  amount  of 
credit,  but  are  used  to  constitute  capital  during  periods  and  under  conditions 
laid  down  in  the  credit  agreement  or  in  an  ancillary  agreement,  the  pre-
contractual  information  required  under  paragraph  2  shall  include  a  clear  and 
concise statement that such credit agreements do not provide for a guarantee of 
repayment  of  the  total  amount  of  credit  drawn  down  under  the  credit 
agreement, unless such a guarantee is given. 

Member  States  shall  ensure  that  creditors  and,  where  applicable,  credit 
intermediaries provide adequate explanations to the consumer, in order to put 
the  consumer  in  a  position  to  assess  whether  the  proposed  credit  agreement  is 
adapted  to  his  needs  and  to  his  financial  situation,  where  appropriate  by 
explaining  the  pre-contractual  information  to  be  provided  in  accordance  with 
paragraph 2 as well as the advantages and the disadvantages associated with the 
products  proposed.  Member  States  may  adapt  the  manner  by  and  extent  to 
which this assistance is given, as well as by whom it is given, to the particular 
circumstances of the situation in which the credit agreement is offered. 

The  creditor  or,  where  applicable,  the  credit  intermediary  shall  seek  to  establish, 
among the credit agreements they usually offer or arrange, the most appropriate type 
and total amount of credit taking into account the financial situation of the consumer, 
the  advantages  and  disadvantages  associated  with  the  product  proposed,  and  the 
purpose of the credit. 

4. 

Paragraphs 1, 2 and 3 do not apply to suppliers of goods or services acting as credit 
intermediaries in an ancillary capacity.  

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Article 6 
Pre-contractual information requirements for credit agreements in the form of an overdraft 
facility and for certain specific credit agreements 

1. 

In  good  time  before  a  consumer  is  bound  by  a  credit  agreement  or  any  offer 
concerning a credit agreement within the meaning of Article 2(3) or Article 2(4), 
the  creditor  and,  where  applicable,  the  credit  intermediary  shall  provide,  on 
paper or on another durable medium, the following information: 

(a) 

the total amount of credit;  

(b) 

the borrowing rate;  

(c) 

the  annual  percentage  rate  of  charge  by  means  of  a  representative 
example  mentioning  all  the  financial  data  and  assumptions  used  for 
calculating that rate; 

(d) 

the  charges  applicable  from  the  time  the  credit  agreement  is  concluded, 
and the conditions under which those charges may be amended; and 

(e) 

the conditions and procedure for terminating the credit agreement. 

In  the  case  of  credit  agreements  within  the  meaning  of  Article  2(3),  the 
information  provided  to  the  consumer  in  accordance  with  point  (e)  of  this 
paragraph shall include, where applicable, an indication that the consumer may 
be requested to repay the amount of credit in full on demand at any time.  

2. 

In  the  case  of  credit  agreements  within  the  meaning  of  Article  2(4),  the 
information  provided  to  the  consumer  in  accordance  with  paragraph  1  of  this 
Article shall also include: 

(a) 

the duration of the credit agreement; and 

(b) 

the amount, number and frequency of payments to be made.  

3. 

4. 

However, if the credit agreement falls within the scope of Article 2(3), only the 
provisions referred to in Article 2(3) shall apply . 

The pre-contractual information to be provided to the consumer in accordance 
with this Article may also be discharged by supplying a copy of the draft credit 
agreement including the information in accordance with Article 9 insofar as this 
Article applies. 

The requirements provided for in this Article shall be fulfilled immediately after 
the conclusion of the credit agreement, if that agreement has been concluded at 
the  consumer’s  request  using  a  means  of  distance  communication  which  does 
not enable providing the information in accordance with this Article.  

EN 

Article 7 
Exemptions 

28 

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Paragraphs  1,  2  and  3Articles  5  and  6  of  this  Directive  shalldo  not  apply  to  suppliers  of 
goods or services acting as credit intermediaries in an ancillary capacity. 

EN 

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CHAPTER III 
PROTECTION OF PRIVACYDATABASE ACCESS 

Article 7 
Collection and processing of data 

Personal data obtained from consumers, guarantors or any other person in connection with the 
conclusion  and  management  of  agreements  covered  by  this  Directive,  and  in  particular  by 
Article  6  (1),  may  be  processed  only  for  the  purpose  of  assessing  the  financial  situation  of 
those persons and their ability to repay. 

Article 8 
Central dDatabase access 

1. 

2. 

3. 

4. 

Without  prejudice  to  the  application  of  Directive  95/46/EC,  Member  States  shall 
ensure  the  operation  on  their  territory  of  a  central  database  for  the  purpose  of 
registration  of  consumers  and  guarantors  who  have  defaulted.  This  database  may 
take the form of a network of databases. Creditors must consult the database prior to 
any commitment on the part of the consumer or guarantor, subject to the restrictions 
referred to in Article 9. The consumer and, where appropriate, the guarantor shall, if 
they  so  request,  be  informed  of  the  result  of  any  consultation  immediately  and 
without chargeIn the case of cross-border credit, each Member State shall ensure 
access  for  creditors  from  other  Member  States  to  databases  in  that  Member 
State under non-discriminatory conditions. 

Access  to  the  central  database  in  another  Member  State  shall  be  ensured  under  the 
same conditions as for firms and individuals in that Member State, either directly or 
via the central database of the home Member StateThe consumer, if he so requests, 
shall  be  informed  of  the  result  of  any  database  consultation  immediately  and 
without charge. 

Personal data received under paragraph 1 may be processed only for the purpose of 
assessing  the  financial  situation  of  the  consumer  and  guarantor  and  their  ability  to 
repay. The data shall be destroyed immediately after the conclusion of the credit or 
surety  agreement  or  the  refusal  by  the  creditor  of  the  application  for  credit  or  the 
proposed surety. 

The central database referred to in paragraph 1 may include the registration of credit 
agreements and surety agreements. 

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CHAPTER IV 
FORMATION OFINFORMATION AND RIGHTS CONCERNING CREDIT AGREEMENTS 

Article 9 
Responsible lending 

Where  the  creditor  concludes  a  credit  agreement  or  surety  agreement  or  increases  the  total 
amount of credit or the amount guaranteed, he is assumed to have previously assessed, by any 
means  at  his  disposal,  whether  the  consumer  and,  where  appropriate,  the  guarantor  can 
reasonably be expected to discharge their obligations under the agreement. 

Article 10 9 
Information that must be included in credit and surety agreements 

1. 

Credit agreements and surety agreements shall be drawn up on paper or on another 
durable medium. 

All the contracting parties including the guarantor and the credit intermediary, shall 
receive  a  copy  of  the  credit  agreement.The  guarantor  shall  receive  a  copy  of  the 
surety agreement. 

Credit  aAgreements  shall  contain  information  regarding  access  to  mention  the 
existence or non-existence of out-of-court dispute resolution complaint and redress 
procedures  and  shall  specify  accessible  to  consumers  who  are  party  to  a  contract 
and,  if  such  procedures  exist,  the  formalities  for  gaining  access  to  themto  be 
followed if a creditor or credit intermediary makes use of such procedures. 

2. 

The credit agreement shall include in a clear and concise manner:  

(a) 

the names and addresses of the contracting parties as well as, if applicable, the 
name and address of the credit intermediary involved; 

(b) 

the duration of the credit agreement; 

(c) 

(d) 

(e) 

the total amount of credit and the conditions governing the drawdown of 
the credit; 

the  borrowing  rate,  the  conditions  governing  the  application  of  that  rate 
and, where available, any index, or reference rate applicable to the initial 
borrowing  rate,  as  well  as  the  periods,  conditions  and  procedures  for 
varying the borrowing rate; 

the annual percentage rate of charge and the total cost of the credit to the 
consumer, calculated at the time the credit agreement is concluded; all the 
financial  data  and  assumptions  used  for  calculating  that  rate  shall  be 
mentioned; 

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(f) 

the  amount,  number  and  frequency  of  payments  to  be  made,  where 
possible set out in a payment schedule; 

(g)  where capital amortisation of a credit agreement with a fixed duration and 
interest rate is involved, a statement of account in the form of an amortisation 
table,  the  payments  owing,  and  the  periods  and  conditions  relating  to  the 
payment  of  these  such  amounts;  the  table  shall  contain  a  breakdown  of  each 
repayment to show capital amortisation, the interest calculated on the basis of 
the borrowing rate and, where applicable, the additional costs; 

(h) 

if charges and interest are to be paid without capital amortisation, a statement 
showing the periods and conditions for the payment of the borrowing interest 
and of the associated recurrent and non-recurrent charges; 

(i)  where  applicable,  the  costs  of  maintaining  an  account  recording  both 
payment  transactions  and  drawdowns,  the  costs  of  using  a  means  of 
payment  for  both  payment  transactions  and  drawdowns,  and  other  costs 
relating to payment transactions; 

(j) 

a  statement  of  the  costs,  indicating  their  purpose  and  amounts,  cost 
components  that  which  are  not  included  in  the  calculation  of  the  annual 
percentage rate of charge but which are known to the creditor or the credit 
intermediary and are to be paid by the consumer,under certain circumstances, 
namely the interest in case of overdue payments as applicable at the time of 
conclusion  of  the  agreement  and  the  arrangements  for  their  adjustment 
commitment fee, penalties, the charges or interests on arrears relating to an 
overrunning  of  unauthorised  drawdowns  in  excess  of  the  total  amount  of 
credit, and the charges for defaulting, plus a list setting out the circumstances; 

(k) 

the sureties and insurance required; 

(l) 

the existence or absence of a right of withdrawal, the period during which 
that right of withdrawal may be exercised, and the procedure to exercise 
that right; 

(m) 

information concerning the rights resulting from Article 14 as well as the 
conditions for the exercise of these rights; 

(n) 

(o) 

(b) 

the  right  of  entitlement  to  early  repayment,  as  well  as  the  procedure  to  be 
applied  by  the  consumer  in  order  to  exercise  this  right,  the  procedure  for 
early  repayment,  and,  where  applicable,  the  costs  arising  therefrom, 
indicating the amount or the calculation method; 

the  procedure  to  be  followed  to  exercise  the  right  of  termination  of  the 
credit agreement; 

the data referred to in Article 6 (2), with the annual percentage rate of charge 
and the lending rate calculated at the time the credit agreement is concluded on 
the basis of all the financial data and assumptions applicable to the agreement; 

(p)  where applicable, the goods or services being financed;  

EN 

32 

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(g) 

entitlement  to  early  repayment,  as  well  as  the  procedure  to  be  applied  by  the 
consumer in order to exercise this right; 

(h) 

the procedure to be followed to exercise the right of withdrawal. 

The  table  referred  to  in  c)  shall  contain  a  breakdown  of  each  repayment  to  show 
capital  amortisation,  the  interest  calculated  on  the  basis  of  the  borrowing  rate  and, 
where applicable, the additional costs.  

If, in the case referred to in c), a new drawdown is not possible without the consent 
of the creditor, the creditor's decision shall be communicated on paper or on another 
durable medium. It shall be made available to the consumer and contain the amended 
data to which this paragraph refers. 

Where the exact amount of these components referred to in e) is known, it shall be 
shown. Otherwise, and as a minimum requirement, these costs must be ascertainable 
in  the  credit  agreement  on  the  basis  of  an  indication  of  the  percentage  linked  to  a 
reference  rate,  a  calculation method  or  the  most  realistic  estimate  possible.  In  such 
cases  the  creditor  shall  make  available  to  the  consumer  on  paper  or  on  another 
durable medium a breakdown of these costs without delay or, at the latest, when they 
are to be applied. 

The  surety  agreement  shall  state  the  maximum  amount  guaranteed,  as  well  as  the 
charges for defaulting to be applied in accordance with the procedure referred to in 
paragraph 2 (e). 

In the case of a credit agreement where payments made by the consumer do not 
give  rise  to  an  immediate  corresponding  amortisation  of  the  total  amount  of 
credit,  but  are  used  to  constitute  capital  during  periods  and  under  conditions 
laid  down  in  the  credit  agreement  or  in  an  ancillary  agreement,  the  pre-
contractual  information  required  under  paragraph  2  shall  include  a  clear  and 
concise statement that such credit agreements do not provide for a guarantee of 
repayment  of  the  total  amount  of  credit  drawndown  under  the  credit 
agreement, unless such a guarantee is given.  

Article 14 10 
Information on the borrowing rate 

The borrowing rate may be fixed or variable 

Where  one  or  a  number  of  fixed  borrowing  rates  have  been  established,  they  shall 
apply for the duration of the period specified in the credit agreement. 

A variable borrowing rate may not vary until the end of agreed periods provided for 
in the credit agreement and may do so only in line with the agreed index of reference 
rate. 

The consumer shall be periodically informed of any changes to the borrowing rate, 
on paper or on another durable medium.  

3. 

3. 

1. 

2. 

3. 

4. 

EN 

33 

   EN 

 
This  information  must  include  the  new  annual  percentage  rate  of  charge  the  creditor’s  new 
total  lending  rate  and  the  new  amortisation  table.  The  calculation  of  the  new  annual 
percentage rate of charge shall be based on Article 12 (3). Where the change to that rate is 
significant,  the  consumer  shall  be  informed  immediately  following  the  date  of  such 
change. 

Article 21 11 
Credit agreement in the form of an advance on a current account or a debit accountoverdraft 
facility 

Where  a  credit  agreement  covers  credit  in  the  form  of  an  advance  on  a  current  account  or 
debit  accountoverdraft  facility,  the  consumer  shall  be  regularly  informed  of  his  debit 
situationby  means  of  a  statement  of  account,  on  paper  or  on  another  durable  medium, 
containing the following information: 

(a) 

(b) 

(c) 

(d) 

(d) 

(e) 

(f) 

(g) 

(g) 

(h) 

(j) 

the precise period to which the statement of account relates; 

the amounts and dates of drawdowns; 

where applicable, the outstanding balance due from the previous statement, and the 
date thereof; 

where applicable, the new balance outstanding; 

the date and amount of charges due; 

the dates and amounts of payments made by the consumer; 

the last agreed borrowing rate; 

the total amount of interest due; 

where applicable, the minimum amount to be paid;  

where applicable, the new balance outstanding; 

the new total amount outstanding, including any interest on arrears or penalties. 

In addition, the consumer shall be notified on paper or any durable medium during the 
course  of  the  agreement  of  changes  in  the  borrowing  rate  or  in  payable  costs 
immediately following the date of such change. 

Article 22 12 
Open-end credit agreements and long term agreements  

1. 

Either  party  may  terminateeffect  standard  termination  of  an  open-end  credit 
agreement by giving three months' notice drawn up on paper or on another durable 
medium in accordance with the procedures laid down in the credit agreement and in 
accordance with national legislation regarding proof. 

EN 

34 

   EN 

 
2. 

3. 

1. 

2. 

3. 

The creditor may terminate without prior notice the consumers’ right to draw 
down on an open-end credit agreement. The creditor shall inform the consumer 
of such decision on paper or on another durable medium without delay.  

Fixed-term  agreements  of  more  than  three  years  may  not  be  renewed  without 
the explicit prior approval of the consumer  

Article 11 13 
Right of withdrawal 

The  consumer  shall  have  a  period  of  fourteen  calendar  days  to  withdraw  his 
acceptance offrom the credit agreement without giving any reason. 

Thatis period of withdrawal shall begin:  

(a) 

either from the day of the conclusion of the credit agreement, or 

(b) 

from  the  day  on  which  the  consumer  receives  the  contractual  terms  and 
conditions and information in accordance with Article 9 (2), if that day is 
later than the date referred to in point (a). on the day a copy of the credit 
agreement concluded is transmitted to the consumer. 

Before  the  consumer  exercises  his  right  of  withdrawal,  he  may  inform  the 
creditor  of  his  intention  to  withdraw  from  the  credit  agreement.  This 
information  shall  be  given  within  a  period  of  seven  calendar  days  after  the 
beginning of the period of withdrawal according to paragraph 1. 

If the consumer exercises his right of withdrawal, as provided for in paragraph 
1  of  this  Article,  he  shall,  before  the  expiry  of  the  deadline  referred  to  in 
paragraph  1,  notify  this  to  the  creditor following the information given  by the 
creditor  in  accordance  with  Article  9  (2)(l)  by  means  which  can  be  proved  in 
accordance  with  national  law.  The  consumer  shall  notify  the  creditor  of  his 
withdrawal before expiry of the period referred to in paragraph 1 and in accordance 
with national legislation regarding proof. 

The deadline shall be deemed to have been observed if this notification, if it is which 
must be on paper or on another durable medium that is available and accessible to the 
creditor, is dispatched before the deadline expires. 

EN 

35 

   EN 

 
4. 

Following the exercise of the right of withdrawal in accordance with paragraph 2, 
the creditor shall notify the consumer, on paper or another durable medium, of 
the  amount  of  money  to  be  repaid  including  the  shall  oblige  the  consumer 
simultaneously  to  return  to  the  creditor  the  sums  of  money  or  goods  that  he  has 
received by virtue of the credit agreement, in so far as provision thereof is governed 
by  the  credit  agreement.  The  consumer  shall  payinterest  due  for  the  period  during 
which credit was drawndown. 

The  interest  due  shall  be  calculated  on  the  basis  of  the  agreed  annual 
percentageborrowing  rateof  charge.  No  other  indemnity  may  be  claimed  in 
connection with exercising the right of withdrawal. 

The  consumer  shall  pay  to  the  creditor  that  amount  of  money  notified  to  him 
under  this  paragraph.  Any  down-payment  effected  by  the  consumer  under  the 
credit agreement shall be repaid to the consumer without delay. 

5. 

Paragraphs 1, 2 and 3 to 4 of this Article shall not apply to credit agreements: 

concluded  through  services  of  an  official,  provided  that  the  official 
confirms that the consumer is guaranteed the rights under Article 5(2) and 
9(2)credit  agreements  secured  by  a  mortgage  or  similar  surety,  credit 
agreements for housing  

(a) 

or  

(b) 

credit agreements cancelled under: 

(i)  Article 6 of Directive 2002/65/EC[on the distance marketing of financial 
services  to  consumers  and  amending  Council  Directives  90/619/EC, 
97/7/EC and 98/27/EC]; 

(ii)  Article 6 (4) of Directive 97/7/EC of the European Parliament and of the 

Council17; 

(iii)  Article  7  of  Directive  94/47/EC  of  the  European  Parliament  and  of  the 

Council18. 

Article 14 
Linked transactions. 

1. 

Where the consumer has exercised a right of withdrawal concerning a contract 
for the supply of goods or services by a trader, he shall no longer be bound by a 
linked credit agreement. 

2. 

Where: 

(a) 

in order to buy goods or obtain services the consumer enters into a credit 

17 
18 

OJ L 144, 4.6.1997, p. 19. 
OJ L 280, 29.10.1994, p. 83. 

EN 

36 

   EN 

 
                                                 
agreement with a person other than the supplier of them;  

(b) 

(c) 

(d) 

the creditor  and the  supplier of  the  goods or  services have a pre-existing 
agreement whereby credit is made available exclusively by that creditor to 
customers  of  that  supplier  for  the  acquisition  of  goods  or  services  from 
that supplier;  

the consumer referred to in point (a) obtains credit pursuant to that pre-
existing agreement;  

the goods or services covered by the credit agreement are not supplied, or 
are  supplied  only  in  part,  or  are  not  in  conformity  with  the  contract  to 
supply them;  

(e) 

the consumer has pursued his remedies against the supplier but has failed 
to obtain the satisfaction to which he is entitled, 

the  consumer  shall  have  the  right  to  pursue  remedies  against  the  creditor. 
Member States shall determine to what extent and under what conditions these 
remedies shall be exercisable. 

Paragraphs  1  and  2  are  without  prejudice  to  any  national  rules  according  to 
which a creditor shall be jointly and severally liable for any claim the consumer 
may have against the supplier where the purchase of goods or services from the 
supplier has been financed by a credit agreement. 

Article 16 15 
Early repayment 

The consumer shall be entitled to discharge fully or partially his obligations under a 
credit agreement at any timebefore the time fixed in the credit agreement. In such 
cases, he shall be entitled to an equitable reduction in the total cost of the credit.  

Any indemnity claimed by tThe creditor shall be entitled to claim shall bebe a fair 
and  objective  indemnity  for  early  repayment  according  to  the  amount  or  the 
calculation method and shall be calculated on the basis of actuarial principlesset out 
in the credit agreement. 

However, nNo indemnity shall be claimed by the creditor: 

(a) 

(b) 

(c) 

for  credit  agreements  where  the  period  used  to  fix  the  borrowing  rate  is  less 
than one year; 

if repayment has been made under an insurance contract intended to provide a 
conventional credit repayment guarantee. 

for  credit  agreements.which  provide  for  payment  of  charges  and  interest 
without  capital  amortisation,  with  the  exception  of  the  credit  agreements 
referred to in Article 20. 

3. 

1. 

2. 

EN 

37 

   EN 

 
Article 17 16 
Assignment of rights 

Where the  creditor's rights under a credit agreement or surety agreement or the agreement 
itself are assigned to a third party, the consumer and, where applicable, the guarantor, shall be 
entitled to plead against the assignee of the creditor's rights under that agreement any defence 
which was available to him against the original creditor, including set-off where the latter is 
permitted in the Member State concerned. 

The consumer shall be informed where the credit agreement has been assigned to a third 
party except where the assignment is effected for securitisation purposes only and where 
the original creditor, in agreement with the assignee, still acts on behalf of the assignee 
as a creditor vis-à-vis the consumer.  

EN 

38 

   EN 

 
Article 18 
Ban on the use of bills of exchange and other securities 

The creditor or assignee of the creditor's rights under a credit agreement or surety agreement 
shall  not  require  or  invite  the  consumer  or  guarantor  to  guarantee  payment  of  their 
commitments under that agreement by means of a bill of exchange or promissory note. 

Moreover, the consumer shall not be required to sign a cheque guaranteeing repayment, in full 
or in part, of the amount due. 

1. 

1. 

2. 

Article 25 17 
Overrunning of the total amount of creditand tacit overdraft 

In the event of an authorised temporary overrunning of the total amount of credit or a 
tacit overdraft, the creditor shall inform the consumer without delay, in writing or on 
another durable medium, of the amount involved and the borrowing rate applicable. 
No penalties, charges or interest on arrears shall be included.  

In  the  event  of  a  significant  overrunning  of  the  total  amount  of  credit  which 
exceeds  a  period  of  one  month,  the  creditor  shall  inform  the  consumerwithout 
delay, on paper or on another durable medium 

(a) 

that he has overrun the credit total amount of credit; 

(b)  or is in an unauthorised overdraft situation and shall inform him of the amount 

involved; 

(c) 

of the borrowing rate; and  

(d)  of  any  penalties,  charges  or  interest  on  arrears  charges  or  penalties 

applicable. 

Any significant overrunning of the total amount of credit or overdraft as referred 
to  in  this  articlewhich  exceeds  a  period  of  three  months  shall  be  rectified,  where 
necessary  through  a  new  credit  agreement  providing  for  a  higher  total  amount  of 
credit. 

EN 

39 

   EN 

 
CHAPTER V 
ANNUAL PERCENTAGE RATE OF CHARGE AND BORROWING RATE 

Article 12 18 
Calculation of the aAnnual percentage rate of charge 

The  annual  percentage  rate  of  charge,  which  equates,  on  an  annual  basis,  to  the 
present  value  of  all  commitments  (drawdowns,  repayments  and  charges),  future  or 
existing,  agreed  by  the  creditor  and  the  consumer  borrower,  shall  be  calculated  in 
accordance with the mathematical formula set out in the Annex I. 

Examples of the method of calculation are given in Annex II, by way of illustration. 

For the purpose of calculating the annual percentage rate of charge, the total cost of 
the  credit  to  the  consumer  shall  be  determined,  with  the  exception  of  the  charges 
payable by the consumer for non-compliance with any of his commitments laid down 
in  the  credit  agreement  and  charges  other  than  the  purchase  price  which,  for 
purchases of goods or services, he is obliged to pay whether the transaction is paid in 
cash or on credit.  

The  costs  of  maintaining  an  account  recording  both  payment  transactions  and 
drawdownscredit  transactions,  the  costs  of  using  a  card  or  another  means  of 
payment for both payment transactions and drawdowns, and otherthe costs relating 
to  payment  transactions  in  general shall be included in the total costs of credit to 
the  consumer unless they  are optional and they have been clearly  and separately 
shown  in  the  credit  agreement  or  in  any  other  agreement  concluded  with  the 
consumer. 

Costs relating to insurance premiums shall be included in the total cost of the credit if 
the insurance is taken out when the credit agreement is concluded. 

The  calculation  of  the  annual  percentage  rate  of  charge  shall  be  based  on  the 
assumption that the credit contract will agreement is to remain valid for the period 
agreed and the creditor and the consumer will are to fulfil their obligations under the 
terms and by the dates agreed in the credit agreement. 

In  the  case  of  credit  agreements  containing  clauses  allowing  variations  in  the 
borrowing rate contained in the annual percentage rate of charge but unquantifiable 
at the time of calculation, the annual percentage rate of charge shall be calculated on 
the assumption that the borrowing rate and other charges will are to remain fixed in 
relation  to  the  initial  level  and  will  are  to  remain  applicable  until  the  end  of  the 
credit agreement. 

1. 

2. 

3. 

4. 

5. 

Where  necessary,  the  following  assumptions  may  be  adopted  in  calculating  the 
annual percentage rate of charge:  

(a) 

if  a  credit  agreement  gives  the  consumer  freedom  of  drawdown,  the  total 
amount of credit shall be deemed to be drawndown immediately and in full;  

EN 

40 

   EN 

 
(b) 

(c) 

if there is no fixed timetable for repayment, and one cannot be deduced from 
the  terms  of  the  credit  agreement  and  the  means  for  repaying  the  credit 
granted, the duration of the credit shall be deemed to be one year;  

unless otherwise specified, where the credit agreement provides for more than 
one  repayment  date,  the  credit  is  to  be  made  available  and  the  repayments 
made on the earliest date provided for in the agreement; 

6. 

7. 

Where a credit agreement is drawn up in the form of a hire agreement with an option 
to purchase and the agreement provides for a number of dates on which the purchase 
option may be exercised, the annual percentage rate of charge shall be calculated for 
each of the these dates. 

Where the residual value cannot be determined, the goods  hired  shall  be  subject to 
linear  amortisation  that  makes  its  value  equal  to  zero  at  the  end  of  the  normal  hire 
period laid down in the credit agreement. 

Where a credit agreement provides for a prior or simultaneous constitution of savings 
and the borrowing rate is set in relation to these savings, the annual percentage rate 
of charge shall be calculated in accordance with the procedure set out in Annex III. 

EN 

41 

   EN 

 
CHAPTER VI 
UNFAIR TERMS 

Article 15 
Unfair terms 

Without  prejudice  to  the  application  of  Directive  93/13/EEC  to  the  agreement  as  a  whole, 
terms in a credit agreement or surety agreement shall be regarded as unfair if their object or 
effect is to: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

impose on the consumer, as a condition for a drawdown, a requirement to leave as 
surety, in full or in part, the sums borrowed or granted, or to use them, in full or in 
part,  to  constitute  a  deposit  or  purchase  securities  or  other  financial  instruments, 
unless the consumer obtains the same rate for such deposit, purchase or surety as the 
agreed annual percentage rate of charge; 

oblige  the  consumer,  when  concluding  a  credit  agreement,  to  enter  into  another 
contract  with  the  creditor,  credit  intermediary  or  a  third  party  designated  by  them, 
unless the costs thereof are included in the total cost of the credit; 

vary any contractual costs, indemnities or charges other than the borrowing rate; 

introduce rules on the variability of the borrowing rate that discriminate against the 
consumer 

introduce a system involving a variable borrowing rate which does not relate to the 
net  initial  borrowing  rate  proposed  when  the  credit  agreement  was  concluded  and 
which would exclude all forms of rebate, reduction or other advantages; 

oblige the consumer to use the same creditor to refinance the residual value and, in 
general,  any  final  payment  on  a  credit  agreement  for  financing  the  purchase  of 
movable property or a service;” 

EN 

42 

   EN 

 
CHAPTER VII 
PERFORMANCE OF A CREDIT AGREEMENT 

Article 18 
Ban on the use of bills of exchange and other securities 

The creditor or assignee of the creditor's rights under a credit agreement or surety agreement 
shall  not  require  or  invite  the  consumer  or  guarantor  to  guarantee  payment  of  their 
commitments under that agreement by means of a bill of exchange or promissory note. 

Moreover,  the  consumer  or  guarantor  shall  not  be  required  to  sign  a  cheque  guaranteeing 
repayment, in full or in part, of the amount due. 

Article 19 
Joint and several liability 

1. 

2. 

Member States shall ensure that the existence of a credit agreement shall not in any 
way  affect  the  rights  of  the  consumer  against  the  supplier  of  goods  or  services 
purchased by means of such an agreement in cases where the goods or services are 
not supplied or are otherwise not in conformity with the contract for their supply.  

If the supplier of goods or services has acted as credit intermediary, the creditor and 
the  supplier  shall  be  jointly  and  severally  liable  for  indemnifying  the  consumer 
where the goods  or services  the  purchase of which has been financed by the credit 
agreement are not supplied, or are supplied only in part, or are not in conformity with 
the contract for their supply 

EN 

43 

   EN 

 
CHAPTER VIII 
SPECIFIC CREDIT AGREEMENTS 

Article 20 
Credit agreement providing constitution of capital 

1. 

2. 

3. 

If payments made by the consumer do not give rise to an immediate corresponding 
amortisation  of  the  total  amount  of  credit,  but  are  used  to  constitute  capital  during 
periods and under conditions laid down in the credit agreement, such constitution of 
capital shall be based on an ancillary agreement attached to the credit agreement. 

The ancillary agreement referred to in paragraph 1 shall provide for an unconditional 
guarantee of repayment of the total amount of credit drawn down. If the third party 
providing  constitution  of  capital  fails  to  comply  with  his  obligations,  the  creditor 
shall assume the risk. 

Payments, premiums and recurrent or non-recurrent charges payable by the consumer 
under the ancillary agreement referred to in paragraph 1, together with interest and 
charges under the credit agreement, shall constitute the total cost of the credit. The 
annual percentage rate of charge and the total lending rate shall be calculated on the 
basis of the total commitment subscribed to by the consumer. 

EN 

44 

   EN 

 
CHAPTER VII 
PERFORMANCE OF A SURETY AGREEMENT 

Article 23 
Performance of a surety agreement 

1. 

2. 

3. 

A  guarantor  may  conclude  a  surety  agreement  guaranteeing  repayment  under  an 
open-end  credit  agreement  for  a  period  of  three  years  only.  This  surety  may  be 
extended only with the specific agreement of the guarantor at the end of that period.  

The  creditor  may  take  action  against  the  guarantor  only  if  the  consumer,  having 
defaulted  on  repayment  of  the  credit,  has  failed  to  comply  with  a  default  notice 
within three months. The guarantor must be informed as soon as a default notice has 
been sent to the consumer. 

The amount guaranteed may only equal the outstanding balance of the total amount 
of credit and any arrears in accordance with the credit agreement, with the exclusion 
of any other indemnities or penalties provided for by the credit agreement.  

EN 

45 

   EN 

 
CHAPTER X 
NON-PERFORMANCE OF A CREDIT AGREEMENT 

Article 24 
Default notice and enforceability 

1. 

Member States shall ensure that 

(a) 

(b) 

creditors,  their  representatives  and  any  other  assignee  of  the  creditor's  rights 
under  a  credit  agreement  or  surety  agreement  may  not  take  disproportionate 
measures to recover amounts due to them in the event of non-performance of 
such agreements;  

the creditor may demand immediate payment in the event of default or invoke 
a clause providing an express resolutive condition only through a prior default 
notice requesting the consumer or, where applicable, the guarantor to comply 
with his obligations under the agreement within a reasonable period of time or 
to apply for rescheduling of the debt;  

(c) 

the  creditor  may  not  suspend  the  consumer's  drawdown  rights  unless  he 
justifies his decision and is required to inform the consumer without delay; 

d) 
in  the  event  of  non-performance  of  their  obligations  or  in  the  event  of  early 
repayment,  the  consumer  and  the  guarantor  are  entitled,  on  request  and  without 
delay,  to  receive  a  detailed  statement  of  account,  free  of  charge,  allowing  them  to 
verify the charges and interest claimed. 

2. 

A default notice as referred to in paragraph 1 (b) is not necessary: 

a) in the event of manifest fraud, evidence of which shall be provided by the creditor 
or the assignee of the creditor's rights; 

b)  where  the  consumer  alienates  the  property  financed  before  the  total  amount  of 
credit is repaid or uses the property in a manner inconsistent with the conditions of 
the  credit  agreement,  and  where  the  creditor  or  the  assignee  of  the  creditor's  rights 
has  a  preferential  claim,  right  of  possession  or  reservation  of  title  on  the  property 
financed,  provided  that  the  consumer  has  been  informed  of  the  existence  of  such 
preferential claim, right of possession or reservation of title prior to the conclusion of 
the contract. 

Article 26 
Repossession of goods 

In the case of credit agreements for the acquisition of goods, Member States shall lay down 
the  conditions  under  which  goods  may  be  repossessed.  If  the  consumer  has  not  given  his 
specific  consent  at  the  moment  the  creditor  proceeds  for  repossession  and  if  he  has  already 
made payments corresponding to a third of the total amount of credit, the goods financed may 
not be repossessed unless by judicial proceedings.  

EN 

46 

   EN 

 
Member States shall further ensure that, where the creditor repossesses the goods, the account 
between the parties is made up so as to ensure that repossession does not entail any unjustified 
enrichment. 

Article 27 
Recovery 

1. 

Natural or legal persons who undertake, as their principal or as a secondary activity, 
and  not  as  part  of  any  court  procedure,  the  recovery  of  debts  arising  from  a  credit 
agreement  or  surety  agreement,  or  who  intervene  in  this  respect,  may  not,  in  any 
form  whatsoever,  either  directly  or  indirectly,  claim  any  fee  or  indemnity  from  the 
consumer  or  guarantor  for  their  intervention,  unless  such  fees  or  indemnities  are 
specifically agreed in the credit agreement or surety agreement. 

2. 

In  the  context  of  the  recovery  of  debts  arising  from  a  credit  agreement  or  surety 
agreement, the following shall be prohibited: 

a) 

any  document  which,  as  a  result  of  its  appearance,  wrongly  gives  the 
impression that it is from a judicial or debt mediation authority; 

b)  written communications containing incorrect information on the consequences 

of defaulting on payment; 

c) 

d) 

e) 

f) 

g) 

h) 

unauthorised repossession of goods without judicial proceedings or the specific 
consent referred to in Article 26;  

any  inscription  on  an  envelope  which  makes  it  clear  that  the  correspondence 
concerns the recovery of a debt; 

collection  of  charges  not  provided  for  by  the  credit  agreement  or  surety 
agreement; 

any  contact  with  the  neighbours,  relatives  or  employer  of  the  consumer  or 
guarantor, especially any communication of, or request for, information on the 
solvency  of  the  consumer  or  guarantor,  without  prejudice  to  actions  forming 
part of statutory seizure procedures as established by Member States; 

physical or psychological harassment of a consumer or guarantor; 

recovery of a lapsed debt. 

EN 

47 

   EN 

 
CHAPTER VI 
REGISTRATION, STATUS AND CONTROL OF CREDITORS AND CREDIT 
INTERMEDIARIES 

Article 28 19 
RegistrationRegulation of creditors and credit intermediaries 

1. 

Member  States  shall  ensure  that  creditors  and  credit  intermediaries  apply  for 
registration 

The obligation to register does not apply to credit intermediaries for whom a creditor 
or  another  credit  intermediary  assumes  responsibility  under  the  terms  of  his  own 
registration. This assumption of responsibility must be made clear in a notice on the 
premises of credit intermediaries not required to register. 

Member States shall ensure that creditors and credit intermediaries are supervised 
by a body or authority independent from financial institutions, or regulated. 

2. 

Member States shall ensure that creditors and credit intermediaries are supervised by 
a body or authority independent from financial institutions, or regulated. 

a) 

b) 

ensure  that  the  activities  of  creditors  and  credit  intermediaries  are  subject  to 
inspection or monitoring by an institution or official body; 

receive  complaints  concerning  credit 
establish  appropriate  bodies 
agreements, surety agreements and credit and surety conditions, and to provide 
consumers and guarantors with relevant information or advice on this subject.  

to 

3. 

Member States may stipulate that registration as referred to in the first subparagraph 
of  paragraph  1  of  this  article  shall  not  be  necessary  where  the  creditor  or  credit 
intermediary concerned is a "credit institution" within the meaning of Article 1(1) of 
Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council19  and  is 
authorised in accordance with the provisions of that Directive.  

Where a creditor or credit intermediary is both registered under the provisions of the 
first subparagraph of paragraph 1 of this article and authorised under the provisions 
of  Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council,  and  the 
latter  authorisation  is  subsequently  withdrawn,  the  competent  authority  which  has 
registered  the  creditor  or  credit  intermediary  shall  be  informed  and  shall  decide 
whether the creditor or credit intermediary may continue to grant or arrange credit or 
whether his registration should be cancelled. 

19 

OJ L 126, 26.5.2000, p. 1. 

EN 

48 

   EN 

 
                                                 
Article 29 20 
Obligations of credit intermediaries 

Member States shall ensure that a credit intermediary: 

(a) 

(b) 

(b) 

indicates  in  advertising  and  documentation  intended  for  clients  the  extent  of  his 
powers, in particular whether he works exclusively with one or more creditors or as 
an independent broker;  

communicates to all creditors contacted the total amount of other credit offers he has 
requested  or  received  for  the  same  consumer  or  guarantor  during  the  two  months 
preceding conclusion of the credit agreement; 

does not receive, directly or indirectly, any fee, in whatever form, from a consumer 
who has requested his services, unless all the following conditions are met: 

(i) 

the  amount  of  the  fee  is  stated  in  the  credit  agreementagreed  between  the 
consumer  and  the  credit  intermediary  on  paper  or  another  durable 
medium; 

(ii) 

the credit intermediary does not receive a fee from the creditor; 

(iii) 

the credit agreement for which he has acted is actually concluded; 

(iv) 

the  credit  intermediary  communicates  the  amount  of  the  fee  to  the 
creditor  for  the  purpose  of  calculation  of  the  annual  percentage  rate  of 
charge. 

EN 

49 

   EN 

 
CHAPTER VII 
IMPLEMENTING MEASURES 

1. 

2. 

3. 

4. 

5. 

6. 

Article 30 21 
Harmonisation, mutual recognition and imperative nature of the Directive Total 
harmonisation and imperative nature of the Directive's provisions 

Insofar as this Directive contains harmonised provisions, Member States may not 
maintain  or  introduce  provisions  other  than  those  laid  down  in  this  Directive., 
except with regard to: 

(a) 

registration  of  credit  agreements  and  surety  agreements  in  accordance  with 
Article 8 (4); 

(b) 

the provisions concerning the burden of proof referred to in Article 33. 

When  implementing  and  applying  Article  5(1),  (2)  and  (5),  Article  13,  Article 
14(1) and (2), Articles 15, 17, 19 and 20, and without prejudice to necessary and 
proportionate  measures  which  Member  States  may  take  on  grounds  of  public 
policy, Member States shall not restrict the activities of creditors established in 
another Member State and operating within their territory in accordance with 
this  Directive  either  through  freedom  of  establishment  or  free  provision  of 
services.  

Member  States  shall  ensure  that  credit  agreements  and  surety  agreements  do  not 
derogate,  to  the  detriment  of  the  consumer  or  guarantor,  from  the  provisions  of 
national law implementing or corresponding to this directive. 

Member States shall further ensure that the provisions they adopt in implementation 
of this dDirective cannot be circumvented as a result of the way in which agreements 
are  formulated,  in  particular  by  integrating  drawdowns  or  credit  agreements  falling 
under the scope of this dDirective into credit agreements the character or purpose of 
which would make it possible to avoid its application. 

Member  States  shall  ensure  that  consumers  and  guarantors  may  not  waive  the 
rights conferred on them by this Directive. 

Member States shall take the necessary  measures  needed to ensure that consumers 
and the guarantor do not lose the protection granted by this Directive by virtue of the 
choice of the law of a non-member country third country as the law applicable to 
the  credit  agreement,  if  the  credit  agreement  has  a  close  link  with  the  territory  of 
one or more Member States. 

EN 

50 

   EN 

 
Article 31 22 
Penalties  

The Member States shall lay down the rules on penalties applicable to for infringements of 
the national provisions adopted in application of pursuant to this Directive and shall take all 
necessary  measures  necessary  to  ensure  that  they  are  implemented.  these  are  enforced. 
These  penalties  provided  for  must  be  effective,  proportionate  and  constitute  a 
deterrentdissuasive.They may provide for the loss of interest and charges by the creditor and 
continuation  of  the  right  of  repayment  in  instalments  of  the  total  amount  of  credit  by  the 
consumer,  in  particular  where  the  creditor  does  not  respect  the  provisions  on  responsible 
lending.Member  States shall  communicate these  notify those provisions to the Commission 
no later than […][2 years after the entry into force of this Directive] by the date specified in 
Article  24  at  the  latest  and  shall  notifiy  it  without  delay  of  any  subsequent  amendments 
concerningaffecting them without delay. 

Article 32 23 
Out-of-court dispute resolutionredress 

Member  States  shall  ensure  that  adequate  and  effective  out-of-court  dispute  resolution 
complaints  and  redress  procedures  for  the  out-of-court  settlement  of  consumer  disputes 
concerning credit agreements are put in place, using existing bodies where appropriate. 

Member  States  shall  encourage  those  bodies  responsible  for  the  out-of-court  settlement  of 
consumer  disputesto  cooperate  in  order  to  also  resolve  cross-border  disputes  concerning 
credit and surety agreements. 

Article 33 
Burden of proof 

Member  States  may  provide  that  the  burden  of  proof  in  respect  of  compliance  with  the 
consumer information obligations imposed on the creditor and credit intermediary, in respect 
of  the  consumer’s  consent  to  the  conclusion  of  the  contract  and,  where  appropriate,  its 
performance, and in respect of the credit intermediary’s remunerated activities may lie with 
the creditor or credit intermediary. Any term in an agreement which provides that the burden 
of  proof  in  respect  of  compliance  by  the  creditor  and,  where  applicable,  the  credit 
intermediary with all or part of the obligations incumbent on them pursuant to this Directive 
should  lie  with  the  consumer  and,  where  applicable,  the  guarantor,  shall  be  an  unfair  term 
within the meaning of Directive 93/13/EEC. 

EN 

51 

   EN 

 
1. 

2. 

3. 

1. 

2. 

3. 

Article 34 
Existing agreements 

This Directive does not apply to credit agreements existing on the date the national 
implementing  measures  enter  into  force,  with  the  exception  of  the  provisions  of 
Articles 1, 2, 3 and 22, 23 (1) and (2), 24 to 27, and 30 to 35. Article 9 shall apply to 
such  contracts  in  so  far  as  an  increase  in  the  total  amount  of  credit  or  the  amount 
guaranteed occurs after the national measures implementing this Directive enter into 
force. 

For  agreements  existing  on  the  date  the  national  implementing  measures  enter  into 
force,  the  amortisation  table  referred  to  in  Article  10  must  be  provided  to  the 
consumer free of charge as soon as either of the following conditions applies:  

(a) 

cancellation of the credit agreement or early repayment; 

b) 

default on payment. 

Member States shall ensure that open-end credit agreements existing on the date the 
national  implementing  measures  enter  into  force  have  to  be  replaced  by  new 
agreements which comply with this Directive are adapted to the requirements of this 
Directive by means of an  addendum to the credit agreement sent by the creditor to 
the  consumer,  no  later  than  [...][two  years  after  from  the  end  date  of  expiry  of  the 
transposition period].  

Article 35 24 
Transposition 

Member States shall adopt and publish, no later than [...][2 years after the entry into 
force of this  Directive] by [insert date][2 years after the entry into force  of this 
Directive]  at  the  latest,  the  laws,  regulations  and  administrative  provisions 
necessary  to  comply  with  this  Directive.  They  shall  immediately  inform  the 
Commission thereof. forthwith communicate to the Commission the text of those 
provisions and a correlation table between those provisions and this Directive. 

They  shall  apply  those  provisions  from  [insert  date]  [2  years  after  the  entry  into 
force of this Directive]. 

When Member States adopt theose provisions, they shall contain a reference to this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

Member  States  shall  communicate  to  the  Commission  the  text  of  the  main 
provisions  of  national  law  which  they  adopt  in  the  field  covered  by  this 
Directive. 

The  Commission  shall  undertake  every  five  years,  and  for  the  first  time  [five 
years  after  the  entry  into  force  of  this  Directive]  a  review  of  the  thresholds  in 
this Directive to assess them in the light of economic trends in the Community 

EN 

52 

   EN 

 
and  the  situation  of  the  market  concerned.  The  results  of  the  review  will  be 
made known to the European Parliament and the Council accompanied where 
appropriate by a proposal to modify the thresholds accordingly.  

EN 

53 

   EN 

 
CHAPTER VIII 
TRANSITIONAL AND FINAL PROVISIONS 

Article 36 25 
Repeal  

Directive 87/102/EEC is repealed with effect from the end of the transposition period for this 
Directive] [insert date ].  

Article 34 26  
Transitional measures 

1. 

2. 

This  Directive  does  shall  not  apply  to  credit  agreements  existing  on  the  date  the 
national implementing measures enter into force, with the exception of the provisions 
of Articles 1, 2, 3 and 22, 23 (1) and (2), 24 to 27, and 30 to 35. open-end credit 
agreements. 

Member States shall ensure that open-end credit agreements existing on the date the 
national  implementing  measures  enter  into  force  have  to  be  replaced  by  new 
agreements which comply with this Directive are adapted to the requirements of 
this  Directive  by  means  of  an  addendum  to  the  credit  agreement  sent  by  the 
creditor to the consumer, no later than [insert date][two years after from the end 
date of expiry of the transposition period]. 

Article 15 27  
Amendment to Directive 93/13/EEC 

In the Annex to Directive 93/13/EEC, the following point 3 is added: 

‘3. 

Terms  of  a  consumer  credit  agreement,  as  defined  in  Article  2(c)  of 
Directive…/…/EC  of  the  European  Parliament  and  the  Council  [on  the 
harmonisation  of  the  laws,  regulations  and  administrative  provisions  of  the 
Member  States  concerning  credit  for  consumers]∗  which  have  the  object  or 
effect of:  

(a) 

imposeimposing  on  the  consumer,  as  a  condition  for  a  drawdown,  a 
requirement to leave as surety, in full or in part, the sumsamounts borrowed or 
granted,  or  to  use  them,  in  full  or  in  part,  to  constitute  a  deposit  or  purchase 
securities  or  other  financial  instruments,  unless  the  consumer  obtains  at  least 
the  same  rate  for  such  deposit,  purchase  or  surety  as  the  agreed  annual 
percentage rate of charge; 

∗ 

*OJ L […], dd/mm/yyyy, p. […]. 

EN 

54 

   EN 

 
                                                 
(b)  obligeing  the  consumer,  when  concluding  a  credit  agreement,  to  enter  into 
another  contract  with  the  creditor,  credit  intermediary  or  a  third  party 
designated by them, unless the costs thereof are included in the total cost of the 
credit to the consumer; 

(c) 

obliginge the consumer to use the same creditor to refinancethe residual value 
and,  in  general,  any  final  payment  on  a  credit  agreement  for  financing  the 
purchase of movable property or a service; 

Article 37 28 
Entry into force and applicability 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European UnionCommunities. 

However,  with  respect  to  Articles  15  and  17,  Article  21(2)  shall  apply  from  [insert 
date][from six years after the date referred to in Article 24]. 

Article 38 29 
Addressees 

This Directive is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

EN 

55 

   EN 

 
ANNEX  
The basic equation expressing the equivalence of drawdowns on the one hand and 
repayments and charges on the other 

The basic equation, which establishes the annual percentage rate of charge (APR), equates, on 
an annual basis, the total present value of drawdowns on the one hand and the total present 
value of repayments and payments of charges on the other hand, i.e.: 

m

∑

k

1
=

C

k

(
1

+

X

−

t

k

)

=

m

'

∑

l

1
=

D
l

(
1

+

X

s

−

) l

where: X 

is the APR 

- 

- 

- 

M 

is the number of the last drawdown 

K 

is the number of a drawdown, therefore 1 ≤ k ≤ m,  

Ck 

tk 

is the amount of drawdown k, 

is the interval, expressed in years and fractions of a year, between the date of 
the first drawdown and the date of each subsequent drawdown, therefore t1 = 0, 

m’ 

is the number of the last repayment or payment of charges,  

l 

Dl 

sl 

is the number of a repayment or payment of charges,  

is the amount of a repayment or payment of charges, 

is the interval, expressed in years and fractions of a year, between the date of 
the first drawdown and the date of each repayment or payment of charges. 

Remarks 

(a) 

(b) 

(c) 

(d) 

The amounts paid by both parties at different times shall not necessarily be equal and 
shall not necessarily be paid at equal intervals. 

The starting date shall be that of the first drawdown. 

Intervals  between  dates  used  in  the  calculations  shall  be  expressed  in  years  or  in 
fractions of a year. A year is presumed to have 365 days (or 366 days for leap years), 
52 weeks or 12 equal months. An equal month is presumed to have 30.41666 days 
(i.e. 365/12) regardless of whether or not it is a leap year.  

The  result  of  the  calculation  shall  be  expressed  with  an  accuracy  of  at  least  one 
decimal place. If the figure at the following decimal place is greater than or equal to 
5, the figure at that particular decimal place shall be increased by one. 

EN 

56 

   EN 

 
 
 
 
 
 
 
(e) 

The  equation  can  be  rewritten  using  a  single  sum  and  the  concept  of  flows  (Ak), 
which  will  be  positive  or  negative,  in  other  words  either  paid  or  received  during 
periods 1 to k, expressed in years, i.e.:  

S

(
= ∑ 1
A
k

+

X

−

) kt

,

n

k

1
=

S 

being the present balance of flows. If the aim is to maintain the equivalence of 
flows, the value will be zero. 

(f) 

Member States shall provide that the methods of resolution applicable give a result 
equal to that of the examples presented in Annexes II and III. 

EN 

57 

   EN 

 
 
 
ANNEX II 
Examples of calculation of the annual percentage rate of charge 

Preliminary remarks 

Unless otherwise stated, all examples assume a single drawdown of credit equal to the total 
amount of the credit and placed at the consumer’s disposal as soon as the credit agreement is 
concluded.  In  this  connection,  it  should  be  noted  that  if  the  credit  agreement  gives  the 
consumer  freedom  of  drawdown,  the  total  amount  of  credit  is  deemed  to  be  drawn  down 
immediately and in full. 

Some Member States, in order to express the borrowing rate, have opted for an effective rate 
and  the  equivalent  conversion  method,  thus  avoiding  a  situation  in  which  the  calculation  of 
periodical  interest  is  carried  out  in  countless  ways  using  different  pro  rata  temporis  rules 
which  have  only  a  very  vague  relationship  with  the  linear  nature  of  time.  Other  Member 
States permit a nominal periodic rate using a proportional conversion method. This directive 
seeks  to  separate  any  further  regulation  of  borrowing  rates  from  the  regulation  of  effective 
rates, simply stating the rate used. The examples in this Annex refer to the method that has 
been used. 

Example 1 

Total amount of credit (capital) of € 6 000.00, repayable in four equal annual instalments of 
€ 1 852.00. 

The equation becomes: 

or: 

6000

=

1852
.

1

−

1
)
X 4

(
1
+
X

6000

=

1852

1
X
+

1

)

1(

+

1852

1
X

2

)

1(

+

+

..........

+

1852

1
X

4

)

1(

+

giving X = 9.00000%, i.e. an APR of 9.0%. 

EN 

58 

   EN 

 
 
 
Example 2 

Total  amount  of  credit  (capital)  € 6 000.00,  repayable  in  48  equal  monthly  instalments  of 
€ 149.31. 

The equation becomes: 

or: 

6000

=

31,149

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

48

]
1

−

6000

=

31,149

1
X

12/1

)

1(

+

+

31,149

1
X

12/2

)

1(

+

+

..........

+

31,149

1
X
)

1(

+

12/48

giving X = 9.380593%, i.e. an APR of 9.4%. 

Example 3 

Total amount of credit (capital) of € 6 000.00, repayable in 48 equal monthly instalments of 
€ 149.31. Administrative charges of € 60.00 are payable on conclusion of the contract. 

The equation becomes: 

or: 

6000

−

60

=

31,149

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

48

]
1

−

5940

=

31,149

1
X

12/1

)

1(

+

+

31,149

1
X

12/2

)

1(

+

+

..........

+

31,149

1
)
X

1(

+

12/48

giving X = 9.954966%, i.e. an APR of 10%. 

EN 

59 

   EN 

 
 
 
 
 
Example 4 

Total amount of credit (capital) of € 6 000.00, repayable in 48 equal monthly instalments of 
€ 149.31.  Administrative  charges  of  € 60.00  are  spread  over  the  repayments.  The  monthly 
instalment is therefore (€ 149.31 + (€ 60/48)) = € 150.56. 

The equation becomes: 

or: 

6000

=

56,150

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

48

]
1

−

6000

=

56,150

1
X

12/1

)

1(

+

+

56,150

1
X

12/2

)

1(

+

+

..........

+

56,150

1
)
X

1(

+

12/48

giving X = 9.856689%, i.e. an APR of 9.9%. 

Example 5 

Total amount of credit (capital) of € 6 000.00, repayable in 48 equal monthly instalments of 
€ 149.31.  Administrative  charges  are  € 60.00,  and  insurance  €  3.00  per  month.  The  costs 
associated  with  insurance  premiums  must  be  included  in  the  total  cost  of  the  credit  if  the 
insurance  is  taken  out  when  the  credit  agreement  is  concluded  The  instalment  is  therefore 
€152.31. 

The equation becomes: 

or: 

5940

=

31,152

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

48

]
1

−

5940

=

31,152

1
X

12/1

)

1(

+

+

31,152

1
X

12/2

)

1(

+

+

..........

+

31,152

1
)
X

1(

+

12/48

giving X = 11.1070115%, i.e. an APR of 11.1%. 

EN 

60 

   EN 

 
 
 
 
 
Example 6 

Balloon-type credit agreement for a total amount of credit of € 6 000.00 (purchasing price of a 
car  to  be  financed),  repayable  in  47  equal  monthly  instalments  of  € 115.02  plus  a  final 
payment  of  € 1 915.02  representing  the  residual  value  of  30%  of  the  capital  (balloon 
agreement),  plus  insurance  of  € 3.00  per  month.  Again,  the  costs  associated  with  insurance 
premiums must be included in the total cost of the credit if the insurance is taken out when the 
credit agreement is concluded The instalment is therefore € 118.02, and the final payment will 
amount to € 1 918.02. 

The equation becomes: 

6000

=

02,118

1

−

1(

or: 

1
)

[
(
1
+

12/1

+

X

12/1

)

X

47

]
1
−

+

1918

02,

1

[
1(

+

X

)

12/1

]48

6000

=

02,118

1
X

12/1

)

1(

+

+

02,118

1
X

12/2

)

1(

+

+

..........

02,118

1
X
)

1(

+

12/47

+

(
1800

+

02,115

+

).3

1
X
)

1(

+

12/48

giving X = 9.381567%, i.e. an APR of 9.4%. 

Example 7 

Credit  agreement  for  a  total  amount  of  credit  (capital)  of  € 6 000.00,  with  administrative 
charges of € 60.00 payable on conclusion of the contract, and two payment periods of 22 and 
26 months respectively. The second-period instalment corresponds to 60% of the first-period 
instalment. The respective monthly instalments are € 186.36 and € 111.82. 

The equation becomes: 

5940

=

36,186

1

−

[
(
1
1(
+

+
X

or:  

1
)

X
12/1
)

12/1

−

22

]
1

+












82,111





1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

−

26

]
1




.





1

[
1(

12/1

+

X

)




] 

22

5940

=


36,186



1
X

12/1

)

1(

+

+

36,186

1
X

12/2

)

1(

+

+

..........

+

36,186

1
X
)

1(

+

12/22







82,111



1
X

12/1

)

1(

+

+

82,111

1
X

12/2

)

1(

+

+

..........

+

82,111

1
X
)

1(

+

12/26


.



[
1(

giving X = 10.04089%, i.e. an APR of 10.0%. 


+


1




] 

22

12/1

+

X

)

EN 

61 

   EN 

 
 
 
 
Example 8 

Credit  agreement  for  a  total  amount  of  credit  (capital)  of  € 6 000.00,  with  administrative 
charges of € 60.00 payable on conclusion of the contract, and two payment periods of 22 and 
26 months respectively, the first-period instalment corresponding to 60% of the second-period 
instalment. The respective monthly instalments are € 112.15 and € 186.91. 

The equation becomes: 

5940

=

15,112

1

−

[
(
1
1(
+

+
X

or: 

1
)

X
12/1
)

12/1

−

22

]
1

+












91,186





1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

−

26

]
1




.





1

[
1(

12/1

+

X

)




] 

22

5940

=


15,112



1
X

12/1

)

1(

+

+

15,112

1
X

12/2

)

1(

+

+

..........

+

15,112

1
X
)

1(

+

12/22







91,186



1
X

12/1

)

1(

+

+

91,186

1
X

12/2

)

1(

+

+

..........

+

91,186

1
X
)

1(

+

12/26


.



[
1(

giving X = 9.888383%, i.e. an APR of 9.9%. 

Example 9 


+


1




] 

22

12/1

+

X

)

Credit agreement for a total amount of credit (price of goods) of € 500.00, repayable in three 
equal monthly instalments calculated by applying the borrowing rate T of 18% (nominal rate), 
plus administrative charges of € 30.00 spread over the payments. The monthly instalment is 
therefore € 171.69 + € 10.00 charges = € 181.69. 

The equation becomes: 

500

=

69,181

1

−

1(

[
(
1
+
X
+

1
)

X
12/1
)

12/1

3

]
1

12/3

)

−

1
X

or: 

500

=

69,181

1
X

12/1

)

1(

+

+

69,181

1
X

12/2

)

1(

+

+

69,181

1(

+

giving X = 68.474596%, i.e. an APR of 68.5%. 

This example typifies practices still used by certain specialist "vendor-credit" establishments. 

EN 

62 

   EN 

 
 
 
 
 
Example 10 

Credit  agreement  for  a  total  amount  of  credit  (capital)  of  € 1 000,  repayable  in  two 
instalments of either € 700.00 after one year and € 500.00 after two years, or € 500.00 after 
one year and € 700.00 after two years 

The equation becomes: 

1000

=

700

1

[
1(

12/1

+

X

)

12

]

+

500

1

[
1(

12/1

+

X

)

]24

giving X = 13.898663%, i.e. an APR of 13,9%. 

or: 

1000

=

500

1

[
1(

12/1

+

X

)

12

]

+

700

1

[
1(

12/1

+

X

)

]24

giving X = 12.321446%, i.e. an APR of 12.3%. 

This  example  shows  that  the  annual  percentage  rate  of  charge  depends  on  the  payment 
periods.  and  that  stating  the  total  cost  of  the  credit  in  the  prior  information  or  in  the  credit 
agreement is of no benefit to the consumerDespite the total cost of credit being € 200 in both 
cases, there are two different APRs (depending on the speed of repayment). 

Example 11 

Credit  agreement  for  a  total  amount  of  credit  of  € 6 000,  with  a  borrowing  rate  of  9%, 
repayment  in  four  equal  annual  instalments  of  € 1 852.01,  and  administrative  charges  of 
€ 60.00 payable on conclusion of the agreement. 

The equation becomes: 

or: 

5940

=

1852

01,

1

−

1
)
X 4

(
1
+
X

5940

=

1852

01,

1
+

1(

X

)

+

1852

01,

1
X
+

2

)

1(

+

..........

+

1852

01,

1
X

4

)

1(

+

giving X = 9.459052%, i.e. an APR of 9.5%. 

In the event of early repayment, the equations become: 

EN 

63 

   EN 

 
 
 
 
 
After one year: 

5940

=

6540

1
X+

)

1(

where 6540 is the sum due, including interest, before payment of the first scheduled payment 
according to the amortisation table, 

giving X = 10.101010%, i.e. an APR of 10.1%. 

After two years: 

5940

=

1852

01,

1
+

1(

X

)

+

5109

91,

1
X

2)

1(

+

where  5109.91  is  the  sum  due,  including  interest,  before  payment  of  the  second  scheduled 
payment according to the amortisation table, 

giving X = 9.640069%, i.e. an APR of 9.6%. 

After three years: 

5940

=

1852

01,

1
+

1(

X

)

+

1852

01,

1
X

2

)

1(

+

+

3551

11,

1
X
+

3

)

1(

where  3551.11  is  the  sum  due,  including  interest,  before  payment  of  the  third  scheduled 
payment according to the amortisation table, 

giving X = 9.505315%, i.e. an APR of 9.5% 

This  shows  how  the  provisional  APR  decreases  in  the  course  of  time,  especially  where 
charges are payable on conclusion of the agreement. 

EN 

64 

   EN 

 
 
 
 
This example can also serve to illustrate the case of a mortgage credit intended to refinance 
current credit agreements where the costs (notary's fees, registration, taxes) are due when the 
authenticated  act  is  completed  and  the  funds  are  made  available  to  the  consumer  from  the 
same date 

EN 

65 

   EN 

 
Example 12 

Credit  agreement  for  a  total  amount  of  credit  of  € 6 000,  with  a  borrowing  rate  T  of  9% 
(nominal rate), repayment in 48 monthly instalments of € 149.31 (calculated proportionally), 
and administrative charges of € 60.00 payable on conclusion of the agreement. 

The equation becomes: 

or: 

5940

=

31,149

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

48

]
1

−

5940

=

31,149

1
X

12/1

)

1(

+

+

31,149

1
X

12/2

)

1(

+

+

..........

+

31,149

1
X
)

1(

+

12/48

giving X = 9.9954957%, i.e. an APR of 10%. 

However, in the case of early repayment, this becomes: 

After one year: 

5940

=

31,149

1

−

1(

[
(
1
+

12/1

+

X

12/1

)

X

11

]
1
−

1
)

+

4844

64,

[
(
1

+

1
)

X

12/1

]12

where  4844.64  is  the  sum  due,  including  interest,  before  payment  of  the  12th  scheduled 
payment according to the amortisation table, 

giving X=10.655907%, i.e. an APR of 10.7%. 

After two years: 

5940

=

31,149

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

23

]
1

+

3417

58,

[
(
1

+

1
)

X

12/1

]24

−

where  3417.58  is  the  sum  due,  including  interest,  before  payment  of  the  24th  monthly 
instalment according to the amortisation table, 

giving X = 10.136089%, i.e. an APR of 10.1%. 

EN 

66 

   EN 

 
 
 
 
 
After three years: 

5940

=

31,149

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

35

]
1

+

1856

66,

[
(
1

+

1
)

X

12/1

]36

−

where  1856.66  is  the  sum  due,  including  interest,  before  payment  of  the  36th  monthly 
instalment according to the amortisation table, 

giving X = 9.991921%, i.e. an APR of 10%. 

Example 13 

Total amount of credit (capital) of € 6 000.00, repayable in four equal annual instalments of 
€ 1 852.00. Let us now assume that the borrowing rate (nominal rate) is variable and increases 
from  9.00%  to  10.00%  after  the  second  annual  instalment.  This  results  in  a  new  annual 
instalment of € 1 877.17. Remember that, in calculating the APR, it is normally assumed that 
the borrowing rate and other costs remain fixed at the initial level and apply until the end of 
the credit agreement. In that case (example 1), the APR will be 9%. 

In the event of any change to the rate, the new APR must be communicated and calculated on 
the  assumption  that  the  credit  agreement  will  remain  in  force  for  the  rest  of  the  agreed 
duration, and that the creditor and consumer will fulfil their obligations under the terms and 
by the dates agreed. 

5940

=

1852

01,

1

−

1

X

2

)

+

(
1
+
X




1877




17,

1

−

1

X

2

)

(
1
+
X

.

1
X

2








or 

The equation becomes:

5940

=

1852

01,

1
+

1(

X

)

+

1852

01,

1
X

2

)

+






1877



17,

1
X
+

3

)

1(

1(

+

+

1877

17,

1
X
+

4

)





+

1
X

2





1(

giving X = 9.741569, i.e. an APR of 9.7%. 

Example 14 

Total amount of credit (capital) of € 6 000.00, repayable in 48 equal monthly instalments of 
€ 149.31, with administrative charges of € 60.00 payable on conclusion of the agreement, plus 
insurance  of  € 3.00  per  month.  The  costs  associated  with  insurance  premiums  must  be 
included in the total cost of the credit if the insurance is taken out when the credit agreement 
is concluded. The instalment is therefore € 152.31 and the calculation, as in example 5, gives 
X = 11.107112, i.e. an APR of 11.11%. 

EN 

67 

   EN 

 
 
 
Let us now assume that the borrowing rate (nominal) is variable and increases to 10% after 
the 17th payment. This change requires a new APR to be communicated and calculated on the 
assumption that the credit agreement will remain in force for the rest of the agreed duration, 
and  that  the  creditor  and  consumer  will  fulfil  their  obligations  under  the  terms  and  on  the 
dates agreed. The equation becomes: 

5940

=

91,151

1

−

[
(
1
(
1
+

+
X

1
)

X
)
12/1

12/1

−

17

]
1

+




22,154





1

−

[
(
1
(
1
+

+
X

1
)

X
)
12/1

12/1

−

31

]
1

.

[
(
1

+

1
)

X

12/1









17

]

5940

=


91,151



1(

+

1
X

12/1

)

+

91,151

1
X

12/2

)

1(

+

+

..........

+

91,151

1
X

)

1(

+

12/17

or: 


+








22,154



1
X

12/1

)

1(

+

+

22,154

1
X

12/2

)

1(

+

+

..........

+

22,154

1
X

)

1(

+

12/31


.



[
1(

1

12/1

+

X

)




] 

17

1

4107,06 

= 

153. 
, 
06 

− 

[ 
( 
1 
+ 
1 (

+ 

X 

1 
/ 1 
) 
X 
/ 1 
12 
) 

31

] 
12 
− 
1 

or: 

4107.06 

= 

153 
, 
06 

1( 

1
+

+ 

06,153 

1
+

1(

12/2

X

)

+

..........

+

06,153

1
+

1(

/ 31 
) 
X 

12 

12 

/ 1 
) 

X 

giving X = 11.542740%, i.e. an APR of 11,5%. 

Example 15 

Credit agreement of the "leasing" type for a car with a value of € 15 000.00. The agreement 
stipulates 48 monthly instalments of € 350. The first monthly instalment is payable as soon as 
the car is placed at the consumer’s disposal. At the end of the 48 months the purchase option 
may be taken up by paying the residual value of € 1 250. 

The equation becomes: 

14650

=

350

1

−

1(

or: 

EN 

1
)

[
(
1
+

12/1

+

X

12/1

)

X

47

]
1
−

+

1250

[
(
1

+

1
)

X

12/1

]48

68 

   EN 

 
 
 
 
14650

=

350

1
X

12/1

)

1(

+

+

350

1
X

12/2

)

1(

+

+

..........

+

350

1
X
)

1(

+

+

1250

12/47

1
X
)

1(

+

12/48

EN 

69 

   EN 

 
 
giving X = 9.541856%, i.e. an APR of 9.5%. 

Example 1611 

Credit agreement of the “financing”, “vendor credit” or “hire purchase” type for goods with a 
value  of  € 2 500.  The  credit  agreement  provides  for  a  down-payment  of  € 500  plus  24 
monthly  instalments  of  € 100,  the  first  of  which  must  be  paid  within  20  days  of  the  goods 
being placed at the consumer’s disposal. 

In such cases the down-payment is never part of the financing operation. 

The equation becomes: 

(

2500

−

500

).

1

[
(
1

+

X

/1

)

365

365
12





]

−

20





1

−

[
(
1
1(
+

+
X

=

100

1
)

X
12/1
)

12/1

24

]
1

−

or: 

2000
.

(
1

+

1
)

X

,10

4316
365

=

100

1
X

12/1

)

1(

+

+

100

1
X

12/2

)

1(

+

+

..........

+

100

1
X
)

1(

+

12/24

giving X = 20.395287, or an APR of 20.4%. 

EN 

70 

   EN 

 
 
 
Example 17 

Credit agreement for a credit line of € 2 500 for a period of six months. The credit agreement 
provides  for  payment  of  the  total  cost  of  the  credit  every  month and  repayment  of  the  total 
amount of the credit at the end of the agreement. The annual borrowing rate (effective rate) is 
8 %, and the charges amount to 0.25 % per month. The assumption that the amount of credit 
is drawn down immediately and in full applies here.  

The monthly borrowing interest payment is calculated on the basis of an equivalent monthly 
rate, using the equation: 

=a

2500

[
{
(
08,1.

12/1

)

]
1
+−

}
25,0

or: 

This becomes: 

=a

2500

,0.(

006434

+

,0

0025
)

=

34,22

2500

=

34,22

1

−

1(

[
(
1
+
X
+

or: 

1
)

X
12/1
)

12/1

6

]
1

+

2500

1

(
1

+

X

) 12/6

−

2500

=

34,22

1
X

12/1

)

1(

+

+

34,22

1
X

12/2

)

1(

+

+

..........

+

34,22

1
X

12/6

)

1(

+

+

2500

1
X

12/6

)

1(

+

giving X = 11.263633 i.e. an APR of 11.3%. 

Example 13 

Credit  agreement  for  an  open-end  credit  line  of  € 2 500.  The  agreement  provides  for  a 
minimum half-yearly payment of 25% of the outstanding balance (capital and interest), with a 
minimum of € 25. The annual borrowing rate (effective rate) is 12%, and the administrative 
charge payable on conclusion of the agreement is € 50. 

(The equivalent monthly rate is obtained by the equation: 

=i

)12,01(

+

12/6

or 5.83%). 

=−

,01

00583

The 19 half-yearly repayments (Dl) can be obtained from an amortisation table, giving D1 = 
661.44; D2 = 525; D3 = 416.71; D4 = 330.75; D5 = 262.52; D6 = 208,37 ; D7 = 165.39; D8 = 
208.37;  D9  =  104.20;  D10  =  82.70;  D11  =  65.64;  D12  =  52.1;  D13  =  41.36;  D14  =  32.82; 
D15 = 25; D16 = 25; D17 = 25; D18 = 25; D19 = 15.28. 

EN 

71 

   EN 

 
 
 
 
 
 
The equation becomes: 

−

=

50

2500

1
X
Giving X = 13.151744%, i.e. an APR of 13.2%. 

44,661

1
X

525

12/12

1(

1(

12/6

+

+

+

)

)

+

..........

+

25

1
X
)

1(

+

+

28,15

108

12/

1
X
)

1(

+

114

12/

Example 19 

Credit agreement for an open-end credit line involving the use of a card for drawdowns. Total 
amount of the credit: € 700. The agreement provides for a minimum monthly payment of 5% 
of the outstanding balance (capital and interest), and the scheduled instalment (a) may not be 
less than € 25. The annual cost of the card is € 20. The annual borrowing rate (effective rate) 
is 0% for the first instalment and 12% for the subsequent instalments. 

The 31 monthly repayment amounts (Dl) can be obtained from an amortisation table, giving 
D1 = 55.00; D2 = 33.57; D3 = 32.19; D4 = 30.87; D5 = 29.61; D6 = 28.39; D7 = 27.23; D8 = 
26.11; D9 = 25.04; D10 à D12 = 25.00; D13 = 45; D14 à D24 = 25,00 ; D25 = 45 ; D26 à 
D30 = 25.00; D31 = 2.25. 

The equation becomes: 

700

=

55

1
X

12/1

)

1(

+

+

57,33

1
X

12/2

)

1(

+

+

..........

+

25

1
X
)

1(

+

+

25,2

12/30

1
X

)

1(

+

12/31

giving X = 18.470574, i.e. an APR of 18.5% 

Example 20 

Open-end credit line in the form of an overdraftadvance on a current account. Total amount of 
credit: € 2 500. The credit agreement does not impose any requirements in terms of repayment 
of  capital,  but  provides  for  monthly  payment  of  the  total  cost  of  the  credit.  The  annual 
borrowing rate is 8% (effective rate). The monthly charges amount to € 2.50. 

It  is  assumed  that  the  full  amount  of  credit  will  be  drawn  down,  with  repayment  in  theory 
after one year. 

EN 

72 

   EN 

 
 
First of all, the theoretical scheduled payment of interest and charges (a) is calculated 
[
(
08,1.

{
2500

]
1
+−

50,2

=a

12/1

)

, 

then: 

i.e.: 

2500

=

59,18

1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

12

]
1

+

2500

1

(
1

12/1

+

X

)12

−

2500

=

59,18

1
X

12/1

)

1(

+

+

59,18

1
X

12/2

)

1(

+

+

..........

+

59,18

1
X

)

1(

+

+

2500

12/12

1
X

)

1(

+

12/12

giving X = 9.295804, i.e. an APR of 9.3% 

EN 

73 

   EN 

 
 
 
ANNEX III – Calculation of the annual percentage rate of charge for a contract 
requiring advance or accompanying savings and for which the borrowing rate is set to 
reflect the level of savings 

Symbols used: 

–  C = Capital 

–  N = duration in years 

–  T = annual borrowing rate 

–  A = annuity 

–  F = periodicity 

–  n = duration in periods 

–  t = periodic borrowing rate 

–  a = periodic repayment. 

–  M = saving period 

1. 

MIXED CREDIT AGREEMENT WITH (COMPULSORY) SAVINGS IN ADVANCE 

First example 

The  granting  of  a  credit  C  totalling  € 6000  over  N  =  two  years  is  subject  to  the  saving  in 
advance over M = two years of half of the said amount, i.e. € 3000 in all, of which the final 
amount saved is € 125 and is deposited one month prior to the drawdown of the credit. The 
savings  in  question  attract  no  interest  but  the  borrowing  rate  for  the  credit  agreement  will 
amount to no more than T = 6% at a time when market conditions are setting a rate of 9% 
insteadThe amount saved each month is e = € 125.00, the monthly repayment a = € 140.91, 
the APR, excluding savings, is 6.17% or 6.2%. 

To find the annual percentage rate applicable to the transaction as a whole the formula is as 
follows 

6000

+

3000

=

1

−

[
(
1
1(
+

+
X




125





or: 

1
)

X
12/1
)

12/1

−

24

]
1

[
(
1.

+

X

12/1

)

25

]

+












91,140





1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

−

48

]
1









,

EN 

74 

   EN 

 
 
6000

+

3000

=






125



1
X

12/1

)

1(

+

+

125

1
X

12/2

)

1(

+

+

..........

+

125

1
)
X

1(

+

12/24


[
(
1.



+

X

12/1

)

25

] }

+


91,140



1(

+

1
X

12/1

)

+

91,140

1
X

12/2

)

1(

+

+

..........

+

91,140

1
)
X

1(

+

12/48





To 
solve the equation using a recursive method, let X1 = 0.062, and the value of the first member 
calculated as 170.5, 

then X2 = 0.063 and the value of the first member is calculated as 163.3 

and so forth 

then X26 = 0.087 and the value of the first member is calculated at 6.0 

then X27 = 0.088 and the value of the first member is calculated at 0.1 

then X28 = 0.089 and the value of the first member is calculated at -5.7. 

The  correct  solution  is  X  =  8.802245%,  or  8.8%  and  this  is  the  APR  to  be  given  to  the 
consumer as the APR for the credit agreement involving an amount to be saved in advance. 

Second example 

The  granting  of  a  credit  C  totalling  € 6000  over  N  =  two  years  is  subject  to  the  saving  in 
advance over M = two years of half of the said amount, i.e. € 3000 in all, of which the final 
amount saved is € 125 and is deposited one month prior to the drawdown of the credit. These 
savings attract a lending rate of S = 3% and the borrowing rate is only T = 6% at a time when 
market conditions set rates at 9%. 

The amount saved each month is e = € 125.00, the monthly repayment a = € 140.91, the APR, 
excluding savings is 6.17% or 6.2%. 

The updated future value of M will be M’ calculated according to the following formula: 

M

'

=

.125

n 1
−

1(

+

)
i
i

, where 

i

=

1(

+

S

)

12/1

−

1

and n = 24 months 

or: 

=−tM
('
1

)

.125

)03,1(
)03.1(

12/24

12/1

1
−
1
−

=

3086

65,

and 

=tM
('
0

)

3086

)03,1.(65,

12/1

=

3094

26,

EN 

75 

   EN 

 
 
 
where t0 = time of credit drawdown. 

EN 

76 

   EN 

 
To find the APR for the transaction as a whole: 

3094

26,

+

6000

=

1

−

[
(
1
1(
+

+
X




125





1
)

X
12/1
)

12/1

−

24

]
1

[
(
1.

+

X

12/1

)

25

]

+












91,140





1

−

[
(
1
1(
+

+
X

1
)

X
12/1
)

12/1

−

48

]
1









or: 

3094

26,

+

6000

=






125



1
X

12/1

)

1(

+

+

125

1
X

12/2

)

1(

+

+

..........

+

125

1
)
X

1(

+

12/24


[
(
1.



+

X

12/1

)

25

] }

+


91,140



1(

+

1
X

12/1

)

+

91,140

1
X

12/2

)

1(

+

+

..........

+

91,140

1
)
X

1(

+

12/48





To solve the equation a recursive method can again be used with X = 7.484710, or an APR of 
7.5%. 

2. 

Mixed agreement with accompanying savings 

2.1.  Mixed  credit  agreement  with  optional  savings  (advances  to  current 

account) 

See  Annex  II,  example  20.  Savings  do  not  form  part  of  the  APR 
calculation2.2. Credit agreement with mixed life assurance 

These are endowment-type mortgages such as those referred to in Article 20 of 
this directive, where saving forms part of the agreement. 

Let  the  total  amount  of  credit  be  € 6000  to  be  repaid  in  four  annuities  at  a 
borrowing  rate  of  9%  but  structured  as  repayments  in  fine.  Suppose  that  the 
manager  of  the  fund  has  paid  at  the  end  of  each  of  the  three  first  years  an 
amount of € 1200.00 and that this amount saved has attracted 4%. The balance 
of  this  account,  before  the  final  repayment  is  due,  will  be  € 3895.76.  It  will 
then be necessary for him to add an additional € 2104.24. His timetable will be 
for three annuities at € 1740.00 and one at € 2644.24 for a capital of € 6000. 

The formula: 

6000

=

1740

.

1

−

1

X

3

)

(
1
+
X

+

2644

.24,

1

(
1(

+

X

)4

or: 

6000

=

1740
.

1
X
+

(
1

1

)

+

1740
.

1
X
+

(
1

2

)

+

1740
.

1
X
+

(
1

3

)

+

2644

.24,

1
X
+

(
1

)4

and X = 10.955466, or an APR of 10.96% 

EN 

77 

   EN