Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on credit agreements relating to residential property    (Text with EEA relevance)
Date: 2011-03-31
Institutions: European Commission
Subjects: competitiveness, consumer information, credit guarantee, financial solvency, financing, mortgage, real estate credit, single market

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EUROPEAN COMMISSION 

Brussels, 31.3.2011 
COM(2011) 142 final 

2011/0062 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on credit agreements relating to residential property 

(Text with EEA relevance) 

SEC(2011) 355 final 
SEC(2011) 356 final 
SEC(2011) 357 final 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

Grounds for and objectives of the proposal 

The present proposal has to be seen in the context of efforts to create an internal market for 
mortgage credit and against the background of the financial crisis. 

The  financial  crisis  has  had  a  substantial  impact  on  EU  citizens.  Although  an  important 
contributing factor was the growth in securitisation, which allowed creditors1 to pass the risk 
of  their  lending  portfolios  to  investors,  consumers  have  faced  the  consequences  first  hand. 
Many  have  lost  confidence  in  the  financial  sector  and  certain  lending  practices  that  used  to 
prevail  are  now  having  a  direct  impact.2  As  borrowers  have  found  their  loans  increasingly 
unaffordable,  defaults  and  foreclosures  have  risen.  Addressing  irresponsible  lending  and 
borrowing is therefore an important element in financial reform efforts. 

For several years, the Commission has engaged in a comprehensive review of EU residential 
mortgages markets to ensure the efficient functioning of the single market. The White Paper 
on the integration of EU mortgage markets3 previously identified areas of direct relevance to 
responsible  lending  and  borrowing  (e.g.  pre-contractual  information,  advice,  assessment  of 
creditworthiness, early repayment and credit intermediation) acting as barriers to the efficient 
functioning  of  the  single  market.  These  barriers  prevent  the  pursuit  of  business  or  raise  the 
cost of doing business in another Member State and lead to consumer detriment through low 
consumer  confidence,  higher  costs  and  reduced  customer  mobility,  both  domestically  and 
cross-border. In view of the problems brought to light in the financial crisis and in the context 
of efforts to ensure an efficient and competitive single market, the Commission undertook to 
come  forward  with  measures  on  responsible  lending  and  borrowing,  including  a  reliable 
framework on credit intermediation.4 To this end, the objectives of the proposal are twofold. 
First, it aims to create an efficient and competitive single market for consumers, creditors and 
credit  intermediaries  with  a  high  level  of  protection  by  fostering  consumer  confidence, 
customer  mobility,  cross-border  activity  of  creditors  and  credit  intermediaries,  and  a  level 
playing  field  while  respecting  fundamental  rights,  particularly  the  right  to  the  protection  of 
personal  data,  enshrined  in  the  Charter  of  Fundamental  Rights  of  the  European  Union. 
Second,  the  proposal  seeks  to  promote  financial  stability  by  ensuring  that  mortgage  credit 
markets operate in a responsible manner. 

General context 

The size of the EU mortgage market is significant: in 2008, outstanding residential mortgage 
lending in the EU27 amounted to almost EUR 6 trillion, or about 50 % of EU GDP.5 The EU 
mortgage  market  is  also  of  vital  importance  for  the  millions  of  European  citizens  currently 
repaying  a  mortgage  and  for  would-be  home  owners.  Taking  out  a  mortgage  is  one  of  the 

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Creditors are defined as credit institutions and non-credit institutions. 
E.g. foreign currency lending, self-certified mortgages. 
COM(2007) 807, 18.12.2007. 
Driving European Recovery, COM(2009) 114, 4.3.2009. 
Hypostat 2008: A review of Europe’s Mortgage and Housing Markets, European Mortgage Federation, 
November 2009, pp. 7, 70 and 71. 

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most  important  financial  decisions  in  a  person’s  life,  entailing  a  financial  commitment 
potentially lasting decades. 

Rising  household  debt  levels  exist  throughout  Europe.  However,  they  are  not  in  themselves 
a sign of irresponsible lending and borrowing as long as the levels of debt are sustainable and 
repayments can be met. However, figures show that citizens are having increasing difficulties 
in meeting their debts. The difficulty in meeting repayments has led to an increase in default 
rates  and  a  rise  in  foreclosures.  Data  can  be  influenced  by  factors  other  than  irresponsible 
lending and borrowing such as the general economic downturn. However, the statistical data 
combined  with  qualitative  evidence  through  stakeholders’  contributions  and  anecdotal 
evidence from across Europe shows that this is not just a cyclical problem or limited to one or 
two Member States but can be found throughout the EU. 

A  range  of  factors  drive  the  decision  to  grant  a  particular  mortgage  credit,  the  borrower’s 
eventual  choice  of  mortgage  product  and  the  borrower’s  ability  to  repay  the  loan.  These 
include  the  economic  climate,  information  asymmetries  and  conflicts  of  interest,  regulatory 
gaps and inconsistencies, as well as other factors such as the borrower’s financial literacy and 
mortgage financing structures. While these other factors clearly play a role, the fact remains 
that irresponsible behaviour by certain market actors contributed to a housing bubble and was 
one  of  the  key  features  of  the  financial  crisis.  It  is  therefore  clear  that  irresponsible  lending 
and borrowing need to be addressed to avoid a repeat of the conditions that led to the current 
financial crisis. 

Existing provisions in the area of the proposal 

Misleading advertising is regulated by Directive 2006/114/EC of the European Parliament and 
of  the  Council  of  12 December 2006  concerning  misleading  and  comparative  advertising6 
which  applies  to  relations  between  traders,  and  Directive  2005/29/EC  of  the  European 
Parliament  and  of  the  Council  of  11  May  2005  concerning  unfair  business-to-consumer 
commercial practices in the internal market7. These rules do not however take into account the 
specificities  of  mortgage  credit  or  address  the  need  for  consumers  to  be  able  to  compare 
adverts. 

Unfair terms in consumer contracts are regulated by Directive 93/13/EEC of the Council of 5 
April 1993 concerning unfair terms in consumer contracts8 and which introduces a notion of 
'good  faith'  in  order  to  prevent  significant  imbalances  in  the  rights  and  obligations  of 
consumers  on  the  one  hand  and  sellers  and  suppliers  on  the  other  hand.  This  general 
requirement  is  supplemented  by  a  list  of  examples  of  terms  that  may  be  regarded  as  unfair. 
These  rules  do  not  however  take  into  account  the  specificities  of  mortgage  credit.  Pre-
contractual  information  for  mortgage  loans  is  the  subject  of  a  European  Voluntary  Code  of 
Conduct  on  Pre-contractual  Information  for  Home  Loans  ('the  Code')  of  March 20019.  The 
Code  was  endorsed  by  the  Commission  in  Recommendation  2001/193/EC  of  1 March 2001 
on  pre-contractual  information  to  be  given  to  consumers  by  lenders  offering  home  loans10. 
The objective of the Code was to set out the general information that should be available to 

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OJ L 376, 27.12.2006, p. 21. 
OJ L 149, 11.6.2005, p. 22. 
OJ L 95, 21.4.1993, p. 29. 
European Agreement on a voluntary Code of Conduct on pre-contractual information for home loans, 
5.3.2001. 
OJ L 69, 10.3.2001, p. 25. 

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the  consumer  and  to  agree  upon  a  European  Standardised  Information  Sheet  with  which 
consumers could compare home loans both domestically and cross-border. Implementation of 
the Code is however inconsistent and sub-optimal. 

A  number  of  Member  States  apply  selected  provisions  of  Directive  2008/48/EC  of  the 
European Parliament and of the Council of 23 April 2008 on credit agreements for consumers 
(the Consumer Credit Directive)11 to mortgage credit. That Directive covers consumer credit 
loans from EUR 200 to EUR 75 000 and regulates advertising, pre-contractual and contractual 
information,  creditworthiness  assessments,  adequate  explanations,  as  well  as  disclosure 
requirements for credit intermediaries. Credits to purchase a property secured by a mortgage 
or another comparable security or loans for renovation in excess of EUR 75 000 are outside 
the scope of that Directive. 

Credit  institutions  are  regulated  and  subject  to  authorisation,  registration  and  supervision 
requirements under Directive 2006/48/EC of the European Parliament and of the Council of 
14 June 2006 relating to the taking up and pursuit of the business of credit institutions12. No 
such  requirements  exist  at  EU  level  for  non-credit  institutions  providing  mortgage  credit  or 
for credit intermediaries. 

Consistency with the EU’s other policies and objectives of the Union 

The objectives of the proposal are consistent with the policies and objectives pursued by the 
Union.  The  Treaty  provides  for  action  to  ensure  the  establishment  and  functioning  of 
an internal market with a high level of consumer protection as well as the freedom to provide 
services. Such a market for residential mortgages is far from completion as several obstacles 
exist to the free provision of services. 

The proposal is furthermore consistent with and complementary to other EU legislation and 
policies,  particularly  in  the  areas  of  consumer  protection  and  prudential  supervision.  The 
Consumer  Credit  Directive13  was  adopted  in  2008  with  the  aim  of  enhancing  the  level  of 
consumer  protection  and  facilitating  the  integration  of  the  consumer  credit  market.  This 
proposal  complements  the  Consumer  Credit  Directive  by  creating  a  similar  framework  for 
mortgage  credit.  The  proposal  largely  draws  on  the  conduct  of  business  provisions  in  the 
Consumer  Credit  Directive;  however,  where  appropriate  the  specific  features  of  mortgage 
credit  have  been  taken  into  account,  for  example  by  introducing  risk  warnings  in  the  pre-
contractual  information  provisions  and  by  strengthening  creditworthiness  assessment 
provisions. In so doing, the proposal also takes into account the fact that some Member States 
have  already  decided  to  apply  certain  provisions  of  the  Consumer  Credit  Directive  to 
mortgage credit. Furthermore, planned or ongoing changes to the prudential and supervisory 
rules governing the banking sector, for example the changes to capital requirements and rules 
on  securitisation,  will  have  a  direct  bearing  on  banks’  lending  practices.  This  proposal 
complements the work on the supervisory side by focusing on ensuring responsible conduct of 
business and on ensuring that a regulatory framework is in place for all actors in the lending 
chain. Together, these initiatives should each contribute to a lower level of credit risk and to 
greater financial stability. 

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OJ L 133, 22.5.2008, p. 66. 
OJ L 177, 30.6.2006, p. 1. 
Directive 2008/48/EC on credit agreements for consumers, 23.4.2008. 

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2. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

Consultation methods, main sectors targeted and general profile of respondents 

In recent years, the Commission has undertaken a thorough review of EU mortgage markets, 
culminating  in  the  White  Paper  on  the  integration  of  EU  mortgage  markets14.  The  White 
Paper  and  the  extensive  consultative  work  leading  up  to  it  form  an  integral  part  of  the 
preparatory work for the responsible lending and borrowing initiative. 

Against  this  background  and  in  the  wake  of  the  financial  crisis,  the  Commission  launched 
a public  consultation  to  strengthen  and  deepen  its  understanding  of  the  issues  surrounding 
responsible lending and borrowing. Commission services also held a number of meetings with 
Member States, creditors and credit intermediary representatives, trade union representatives, 
and  consumer  representatives,  throughout  the  process.  The  European  Parliament  and  the 
European Economic and Social Committee have adopted several reports on issues relating to 
responsible lending and borrowing. The Commission consulted the European Data Protection 
Supervisor with regard to the protection of consumers’ personal data. The Commission also 
took note of significant research undertaken in other fora such as the OECD and the World 
Bank. 

Summary of responses and how they have been taken into account 

The extensive consultation process has allowed some key messages to be identified. First, the 
banking industry argues that irresponsible lending does not exist in the EU to the same extent 
as  in  the  US,  so  that  there  is  no  need  for  EU  intervention.  Although  the  problems  in  EU 
mortgage  markets  have  not  been  as  widespread  as  in  the  US,  similar  weaknesses  in  the 
regulation  of  EU  markets  have  been  identified,  e.g.  a  lack  of  effective  regulation  of  certain 
actors  and  weaknesses  in  the  regulation  of  the  mortgage  marketing  and  sales  processes. 
Second,  consumer  representatives  support  an  initiative  that  will  ensure  a  high  level  of 
consumer  protection  and  that  could  prevent  over-indebtedness.  They  are  also  supportive  of 
measures  that  would  allow  consumers  to  compare  offers  and  give  consumers  confidence  in 
the  actors  with  whom  they  engage.  They  favour  an  EU-level  proposal  that  would  introduce 
only minimum standards, leaving Member States free to enhance consumer protection in line 
with  local  conditions  and  culture.  Third,  given  the  current  small  market  for  cross-border 
mortgages,  some  stakeholders  argue  that  it  would  be  more  appropriate  for  measures  to  be 
taken  at  national  rather  than  EU  level.  Three  of  the  issues  for  which  there  was  the  most 
consistent  cross-stakeholder  support  for  EU  action  were  the  obligation  to  undertake 
a creditworthiness  assessment,  the  need  for  clear,  comprehensible  and  comparable  pre-
contractual  information  and  the  need  to  ensure  that  all  players  in  the  lending  market  are 
subject to appropriate regulation and supervision. 

The information collected has confirmed that there is a case for EU intervention in the field of 
responsible  mortgage  lending  and  borrowing  and  has  substantially  contributed  to  the 
prioritisation and design of the Directive. 

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COM(2007) 807, 18.12.2007. 

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Collection and use of expertise 

The Commission also drew on a series of studies and reports undertaken on issues relating to 
responsible lending and borrowing, including the study by London Economics on the role and 
regulation of non-credit institutions in the EU mortgage market (December 2008); the study 
by  Europe  Economics  on  credit  intermediaries  in  the  internal  market  (January  2009);  the 
report  of  the  Expert  Group  on  Credit  Histories  (June  2009);  the  report  by  OPTEM  on  the 
consumer  testing  of  a  possible  new  format  and  content  for  the  European  Standardised 
Information Sheet on home loans (October 2009); and the study by London Economics on the 
costs and benefits of different policy options for mortgage credit (March 2011). 

Impact assessment 

The Commission carried out an impact assessment. 

The  impact  assessment  identifies  a  series  of  problems  in  EU  mortgage  markets  associated 
with irresponsible lending and borrowing at the pre-contractual stage and the potential scope 
for  irresponsible  behaviour  by  credit  intermediaries  and  non-credit  institutions.  These 
problems  are  driven  by  market  and  regulatory  failures  as  well  as  other  factors  such  as  the 
general economic climate and low levels of financial literacy. At the pre-contractual stage, the 
following  problems  were  identified:  non-comparable,  unbalanced,  incomplete  and  unclear 
advertising  materials;  insufficient,  untimely,  complex,  non-comparable  and  unclear  pre-
contractual information; inappropriate advice; and inadequate suitability and creditworthiness 
assessments.  Other  problems  highlighted  include  ineffective,  inconsistent,  or  non-existent 
registration,  authorisation  and  supervision  regimes  for  credit  intermediaries  and  non-credit 
institutions  providing  mortgage  credit.  The  problems  identified  have  potentially  significant 
macroeconomic spill-over effects, can  lead to consumer detriment, act as economic or legal 
barriers to cross-border activity and create an unlevel playing field between actors. 

The impact assessment considers a range of policy options for each problem area including no 
intervention,  principles-based  rules,  and  more  detailed  or  specific  rules  at  EU  level.  It  also 
instrument  for  measures,  considering  self-regulation, 
assesses 
a Directive, a Regulation, a Communication and a Recommendation. 

the  most  appropriate 

The  impact  assessment  concludes  that  a  package  of  preferred  policy  options  is  necessary  to 
ensure  responsible  lending  and  borrowing  throughout  the  EU  and  that  the  preferred 
instrument is a Directive. 

The impact assessment’s preferred options should result in a substantial improvement in terms 
of a reduction of consumer  detriment.  They will improve consumer confidence in creditors, 
credit  intermediaries  and  mortgage  products  and  will  reduce  the  likelihood  of  consumers 
purchasing an unaffordable product, which could potentially lead to overindebtedness, default 
and  eventually  foreclosure.  The  strong  positive  effect  on  consumer  confidence  is  also 
expected  to  underpin  the  demand  for  mortgage  credit  products  and  encourage  consumer 
mobility at both national and, albeit to a lesser extent, cross-border level. The implementation 
of some of the selected options will not lead to significant changes in the operation of market 
actors  on  the  supply  side  in  a  number  of  Member  States,  where  similar  obligations  already 
exist.  However,  the  preferred  policy  options  will  have  an  important  impact  on  the  cross-
border activity of creditors and credit intermediaries. Implementation of the preferred options 
will  encourage  cross-border  activity  by  offering  new  business  opportunities  as  well  as 
economies of scale and scope. This will have a positive impact both on the market players and 

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for  consumers.  The  entry  of  foreign  credit  providers  and  credit  intermediaries  should 
strengthen  competition  and,  thus,  translate  into  a  wider  range  of  credit  products  for  the 
consumer  and  potentially  even  a  marginal  decrease  in  prices.  The  preferred  policy  options 
will  also  entail  costs  for  creditors  and  credit  intermediaries.  However,  these  costs  will  be 
limited by several factors including the fact that a number of the preferred policy options are 
already implemented in several Member States, that many of the preferred policy options are 
already  common  practice  amongst  large  parts  of  industry  and  that  substantial  synergies  are 
expected between the different policy options. The estimated total benefits of the package of 
measures  are  in  the  range  of  EUR 1 272–1 931 million.  The  expected  total  one-off  and 
ongoing  costs  are  in  the  range  of  EUR 383-621 million  and  of  EUR 268-330 million 
respectively. 

The  different  policy  options  and  their  impact  on  stakeholders  are  discussed  at  length  in  the 
impact assessment. 

3. 

LEGAL ELEMENTS OF THE PROPOSAL 

Legal basis 

Article 114 of the Treaty on the functioning of the EU. 

Subsidiarity principle 

The  subsidiarity  principle  applies  insofar  as  the  proposal  does  not  fall  under  the  exclusive 
competence of the Union. 

The objectives of the proposed action cannot be sufficiently achieved by Member States and 
can therefore, by reason of the scale or effects of the proposed action, be better achieved by 
the Union, for the following reason(s): 

The  Treaty  provides  for  action  to  ensure  the  establishment  and  functioning  of  an  internal 
market with a high level of consumer protection as well as the free provision of services. Such 
a market for residential mortgages is far from completion as several obstacles exist to the free 
provision of services and the creation of an internal market. These obstacles restrict the level 
of cross-border activity on the supply and demand sides, reducing competition. Creditors may 
be less efficient than they could be and borrowers may face the risk of consumer detriment. 

Factors  that  prevent  the  pursuit  of  business  or  raise  the  cost  of  doing  business  in  another 
Member State  relative  to  the  costs  faced  by  domestic  providers  can  be  addressed  by 
appropriate  EU  policy  initiatives.  Some  of  the  problems  identified  could  raise  the  cost  of 
mortgage lending for domestic providers or prevent them from doing business. However, the 
costs of entering into business are exacerbated for creditors seeking to engage in cross-border 
activity and can deter new market entrants thereby restricting competition. 

In  a  competitive  and  efficiently  functioning  single  market  with  a  high  level  of  consumer 
protection, consumers would search for the best product offered for their needs, be it in their 
own  country  or  in  another  Member  State.  EU  consumers  continue  to  predominantly  shop 
locally  though  for  their  mortgage  credits.  This  can  be  attributed,  inter  alia,  to  a  lack  of 
consumer  awareness  of  what  exists  elsewhere  and  lack  of  consumer  confidence  due  to 
insufficient or bad information, fears about whether legal rights will be upheld, or poor legal 
protection in the event that something goes wrong. 

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Financial integration and financial stability are mutually reinforcing objectives which operate 
at national level but crucially depend on certain tasks that can only be achieved at EU level. 
As the recent financial crisis illustrated, the effects of irresponsible lending in one country can 
quickly  spread  beyond  national  borders  due  in  part  to  the  multinational  presence  of  certain 
banking groups and also the international nature of securitised risk. This Directive focuses on 
the  interaction  between  creditors/intermediaries  and  citizens.  Irresponsible  lending  and 
borrowing was one of the factors at the origin of the financial crisis: it greatly contributed to 
the emergence of the financial turmoil. The proposed provisions should ensure that mortgage 
credit  throughout  the  EU  is  undertaken  in  a  responsible  manner  and  that  it  contributes  to 
promoting EU financial, economic and social stability. 

Creating  an  internal  market  in  mortgage  credit  with  a  high  level  of  consumer  protection  as 
well as facilitating the provision of services throughout the EU would be fully in line with the 
Treaty. Action by Member States alone is likely to result in different sets of rules, which may 
undermine or create new obstacles to the functioning of the internal market as well as create 
unequal levels of consumer protection throughout the EU. Common standards at the EU level, 
such as the ones proposed, should promote an efficient and competitive internal market with 
a high  level  of  consumer  protection.  Such  standards  are  further  essential  in  order  to  ensure 
that  the  appropriate  lessons  are  learnt  from  the  sub-prime  crisis  and  to  ensure  that  such 
a financial crisis does not reoccur in the future. 

The proposal therefore complies with the subsidiarity principle. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reason(s): 

The proposal does not go beyond what is strictly necessary to achieve its objectives. It does 
not  regulate  all  aspects  of  lending  and  borrowing  but  focuses  on  some  key  aspects  of  the 
mortgage credit transaction. 

All  of  the  proposed  rules  have  been  the  subject  of  a  proportionality  test  and  intensive 
consultation to ensure appropriate and proportionate regulation. 

The proposal allows for the later adoption of implementing measures or technical standards, 
in  case  specific  issues  require  the  development  of  more  detailed  technical  guidance  or 
clarification. 

On 23 September 2009, the Commission adopted proposals for Regulations establishing EBA, 
EIOPA,  and  ESMA.15
  In  this  respect  the  Commission  wishes  to  recall  the  Statements  in 
relation to Articles 290 and 291 TFEU it made at the adoption of the Regulations establishing 
the  European  Supervisory  Authorities  according  to  which:  "As  regards  the  process  for  the 
adoption  of  regulatory  standards,  the  Commission  emphasises  the  unique  character  of  the 
financial services sector, following from the Lamfalussy structure and explicitly recognised in 
Declaration  39  to  the  TFEU.  However,  the  Commission  has  serious  doubts  whether  the 
restrictions  on  its  role  when  adopting  delegated  acts  and  implementing  measures  are  in  line 
with Articles 290 and 291 TFEU." 

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http://ec.europa.eu/internal_market/finances/committees/index_en.htm#package 

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Choice of instruments 

Proposed instrument: Directive. 

Other means would not be adequate for the following reason(s): 

Full  harmonisation  is  not  always  necessary  or  appropriate:  e.g.,  the  structure  of  housing 
markets and mortgage markets differs throughout the EU, and the products and remuneration 
structures also vary. EU intervention needs to be detailed enough to be effective but high level 
enough  to  take  into  account  the  EU’s  diversity.  A  Directive  offers  a  degree  of  flexibility  in 
terms of the level of harmonisation. Such targeted provisions can accommodate the diversity 
that exists in the EU’s mortgage markets. 

It  is  recommended  that  the  legal  instrument  of  a  Directive  be  used  for  the  package  of 
proposed measures. 

4. 

BUDGETARY IMPLICATION 

Leaving  aside  the  normal  administrative  costs  linked  to  ensuring  compliance  with  EU 
legislation,  there  will  be  no  budgetary  impact  since  no  new  committees  are  created  and  no 
financial commitments are made. 

5. 

ADDITIONAL INFORMATION 

Review/revision/sunset clause 

The proposal includes a review clause. 

European Economic Area 

The  proposed  act  concerns  an  EEA  matter  and  should  therefore  extend  to  the  European 
Economic Area. 

Detailed explanation of the proposal 

The following short summary aims to facilitate the decision making process by outlining the 
main substance of the Directive. 

Article  1  (subject  matter)  states  that  the  Directive  focuses  on  mortgage  credit  to  consumers 
and on certain prudential and supervisory requirements for creditors and credit intermediaries. 
As such, the focus of the Directive is on residential rather than commercial property. 

Article 2 (scope) sets out the scope of the Directive, which covers credit agreements secured 
by  a  mortgage  or  by  another  security,  loans  to  purchase  a  property  and  certain  credit 
agreements aimed at financing the renovation of a property. The Directive does not preclude 
the possibility that some Member States may wish to extend the scope to other beneficiaries 
such  as  small  or  medium-sized  enterprises  or  indeed  to  some  commercial  property 
transactions. 

Article 3 (definitions) defines the terms used in this Directive. To the greatest extent possible, 
definitions  have  been  aligned  with  those  in  other  Union  texts  in  particular  Directive 

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2008/48/EC of the European Parliament and of the Council of 23 April 2008 which lays down 
rules at Union level concerning credit agreements for consumers and Directive 2002/92/EC of 
the European Parliament  and  of  the  Council  of  9  December  2002  on  insurance  mediation16. 
However, given the specificities of this Directive, some have been tailored to the needs of this 
proposal. 

Article  4  (competent  authorities)  requires  Member  States  to  designate  specific  competent 
authorities to implement the Directive. 

Articles  5  (conduct  of  business  obligations  when  providing  credit  to  consumers)  and 
6 (minimum  competence  requirements)  stipulate  important  conditions for  both  creditors  and 
credit intermediaries in order to ensure a high degree of professionalism in the provision of 
mortgage  credit,  such  as  an  obligation  to  act  in  the  best  interests  of  the  consumer  and 
requirements with regard to having appropriate knowledge and competence. 

Articles  7  (general  provisions  applicable  to  advertising  and  marketing)  and  8  (standard 
information  to  be  included  in  advertising)  introduce  general  principles  for  marketing  and 
advertising communications and set out the form and content of information to be included in 
advertising. The standard information concerns key features of the credit and, when the credit 
is secured by a mortgage, a warning as to the consequences for the consumer in the event of 
non-observance  of  his  commitments  linked  to  the  credit  agreement.  These  provisions 
complement  and  expand  on  the  obligations  of  Directive  2005/29/EC  of  the  European 
Parliament  and  of  the  Council  of  11  May  2005  concerning  unfair  business-to-consumer 
commercial  practices  in  the  internal  market  and  amending  Council  Directive  84/450/EEC, 
Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council 
and Regulation (EC)  No  2006/2004 of the  European Parliament and of the Council  ('Unfair 
Commercial Practices Directive'). 

Article  9  (pre-contractual  information)  creates  an  obligation  for  creditors  and  credit 
intermediaries  to  make  general  information  available  on  the  range  of  credit  products  at  all 
times.  It  further  introduces  an  obligation  for  creditors  and,  where  applicable,  credit 
intermediaries to provide personalised information to the consumer on the basis of a European 
Standardised Information Sheet. These requirements largely mirror the voluntary obligations 
set out in the European Voluntary Code of Conduct on Home Loans. The content and layout 
of the European Standardised Information Sheet, as detailed in Annex II, has, however, been 
updated to take into account the results of consumer testing in 27 Member States. 

Article  10  (information  requirements  concerning  credit  intermediaries)  requires  credit 
intermediaries  to  disclose  information  to  consumers  concerning  their  identity,  status,  and 
relationship with the creditor, prior to the performance of  their services in order to increase 
transparency of possible conflicts of interest. 

Article  11  (adequate  explanations)  introduces  an  obligation  for  creditors  and  credit 
intermediaries to give explanations on the proposed credit agreement(s) to the consumer at the 
pre-contractual  stage,  determined  by  the  level  of  the  consumer’s  knowledge  and  experience 
with credit. 

Article  12  (calculation  of  the  annual  percentage  rate  of  charge)  concerns  the  main  indicator 
used for the comparison of mortgage credit products. It requires, for mortgage credit products, 

16 

OJ L 9, 15.1.2003, p. 3. 

EN 

10 

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the  use  of  the  definition  of  the  annual  percentage  rate  of  charge  (APRC)  used  in  Directive 
2008/48/EC of the European Parliament and of the Council of 23 April 2008 which lays down 
rules at Union level concerning consumer credit agreements. Details of the APRC calculation 
method are given in Annex I and provisions for amending the methodology are laid down in 
order to be able to take market developments into account. 

Article  13  (information  concerning  the  borrowing  rate)  provides  for  information  to  be 
delivered to the consumer in the event of changes to the borrowing rate. 

Article 14 (obligation to assess the creditworthiness of the consumer) requires the creditor to 
assess the consumer’s ability to repay the credit, taking into account the consumer’s personal 
circumstances and based on sufficient information. It also introduces a duty for the creditor to 
refuse to grant the credit where the results of the creditworthiness assessment are negative. 

Articles 15 (disclosure obligation on the part of the consumer) introduces the requirement for 
'responsible  borrowing',  namely  that  the  borrower  must  provide  all  necessary  and  correct 
information to enable the creditworthiness assessment to be carried out. 

Article 16 (database access) introduces provisions to ensure that creditors are able to access 
information from relevant databases on a non-discriminatory basis. 

Article 17 (advice standards) establishes standards to ensure that, where advice is given, it is 
clear  to  the  borrower  that  advice  is  being  provided,  without  introducing  any  obligation  to 
provide advice. It introduces a requirement that a sufficient number of credit agreements on 
the market be considered and that advice be given in line with the profile of the borrower. 

Article 18 (early repayment) requires Member States to ensure that consumers have a right to 
repay their credit before the expiry of the credit agreement, giving freedom to Member States 
to  set  conditions  on  the  exercise  of  that  right,  provided  that  such  conditions  are  not 
excessively onerous. 

Articles 19 to 22 (on the authorisation, registration and supervision of credit intermediaries) 
establish the principles for a regulatory and supervisory framework for credit intermediaries. 
This  framework  provides  for  the  authorisation  and  registration  of  credit  intermediaries, 
subject to compliance with certain requirements on entry into the business and on an ongoing 
basis,  and  for  the  establishment  of  a  passport  regime.  The  requirements  apply  to  all  credit 
intermediaries,  whether  they  are  tied  or  not  in  order  to  ensure  a  high  degree  of 
professionalism in the industry. 

Article 23 (authorisation, registration and supervision of non-credit institutions) stipulates that 
non-credit institutions must be subject to adequate authorisation, registration and supervision. 
This  should  ensure  that  all  creditors,  whether  they  are  a  credit  institution  or  not,  are 
adequately regulated and supervised. 

Article  24  (penalties)  requires  Member  States  to  ensure  that  appropriate  administrative 
measures or sanctions can be taken in the case of non-compliance with the Directive. 

Article 25 (dispute resolution mechanisms) requires Member States to establish out-of-court 
redress  bodies  for  the  resolution  of  disputes  between  creditors  and  consumers  and  between 
credit intermediaries and consumers. 

EN 

11 

   EN 

Articles  26  to  28  (delegated  acts)  sets  out  the  procedures  to  be  followed  to  allow  certain 
elements of the Directive to be adapted, specified or updated. 

Article  29  (imperative  nature  of  this  Directive)  and  Article  30  (transposition)  stipulate 
respectively that the Directive should be implemented by Member States and how it should be 
implemented. 

Article 31 (review clause) provides  for a review of the appropriateness and effectiveness of 
the Directive in meeting its objectives after five years. 

EN 

12 

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2011/0062 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on credit agreements relating to residential property 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission17, 

After transmission of the draft legislative act to the national Parliaments18, 

Having regard to the opinion of the European Economic and Social Committee19, 

Having regard to the opinion of the Committee of the Regions20, 

Having regard to the opinion of the European Central Bank21, 

After having consulted the European Data Protection Supervisor22, 

Acting in accordance with the ordinary legislative procedure23, 

Whereas: 

(1) 

In March 2003, the Commission launched a process to identify and assess the impact 
of  barriers  to  the  internal  market  for  credit  agreements  relating  to  residential 
immovable  property.  In  2007,  it  adopted  a  White  Paper  on  the  integration  of  EU 
mortgage credit markets24. The White Paper announced the Commission’s intention to 
assess  the  impact  of,  among  other  things,  the  policy  options  for  pre-contractual 
information,  credit  databases,  creditworthiness,  the  annual  percentage  rate  of  charge 
and advice. The Commission also established an Expert Group on Credit Histories to 

17 
18 
19 
20 
21 
22 
23 
24 

OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
OJ C XX, XX, p. xx. 
COM(2007) 807, 18.12.2007. 

EN 

13 

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the  Commission 

assist 
the  accessibility, 
comparability  and  completeness  of  credit  data.  Studies  on  the  role  and  operations  of 
credit intermediaries and non-credit institutions providing credit agreements relating to 
residential immovable property were also launched. 

in  preparing  measures 

improve 

to 

(2) 

(3) 

(4) 

In accordance with the Treaty, the internal market comprises an area without internal 
frontiers  in  which  the  free  movement  of  goods  and  services  and  the  freedom  of 
establishment are ensured. The development of a more transparent and efficient credit 
market  within  that  area  is  vital  to  promote  the  development  of  cross-border  activity 
and  create  an  internal  market  in  credit  agreements  relating  to  residential  immovable 
property.  There  are  substantial  differences  in  the  laws  of  the  various  Member  States 
with  regard  to  conduct  of  business  in  the  granting  of  credit  agreements  relating  to 
residential  immovable  property  and  in  the  regulation  and  supervision  of  credit 
intermediaries  and  non-credit  institutions  providing  credit  agreements  relating  to 
residential immovable property. Such differences create obstacles that restrict the level 
of  cross-border  activity  on  the  supply  and  demand  sides,  thus  reducing  competition 
and choice in the market, raising the cost of lending for providers and even preventing 
them from doing business. 

The financial crisis has shown that irresponsible behaviour by market participants can 
undermine  the  foundations  of  the  financial  system,  leading  to  a  lack  of  confidence 
among all parties, in particular consumers, and potentially severe social and economic 
consequences.  Many  consumers  have  lost  confidence  in  the  financial  sector  and 
borrowers have found their loans increasingly unaffordable, with defaults and forced 
sales rising. In view of the problems brought to light in the financial crisis and in the 
context  of  efforts  to  ensure  an  efficient  and  competitive  internal  market,  the 
Commission  has  proposed  measures  with  regard  to  credit  agreements  relating  to 
framework  on  credit 
including  a 
residential 
intermediation,  in  the  context  of  delivering  responsible  and  reliable  markets  for  the 
future and restoring consumer confidence.25 

immovable  property, 

reliable 

A  series  of  problems  in  EU  mortgage  markets  associated  with  irresponsible  lending 
and  borrowing  at  the  pre-contractual  stage  and  the  potential  scope  for  irresponsible 
behaviour  by  credit  intermediaries  and  non-credit  institutions  have  been  identified. 
Some problems concerned loans denominated in a foreign currency which consumers 
had taken out in that currency to take advantage of the interest rate offered but without 
having an  adequate  understanding  of the currency risk involved. These problems are 
driven  by  market  and  regulatory  failures  as  well  as  other  factors  such  as  the  general 
economic  climate  and  low  levels  of  financial  literacy.  Other  problems  include 
ineffective,  inconsistent,  or  non-existent  registration,  authorisation  and  supervision 
regimes  for  credit  intermediaries  and  non-credit  institutions  providing  credit  for 
residential  immovable  property.  The  problems  identified  have  potentially  significant 
macroeconomic spill-over effects, can lead to consumer detriment, act as economic or 
legal  barriers  to  cross-border  activity  and  create  an  unlevel  playing  field  between 
actors. 

(5) 

In  order  to  facilitate  the  emergence  of  a  smoothly  functioning  internal  market  with 
a high  level  of  consumer  protection  in  the  area  of  credit  agreements  relating  to 

25 

Driving European Recovery, COM(2009) 114, 4.3.2009. 

EN 

14 

   EN 

                                                 
(6) 

(7) 

(8) 

(9) 

residential  immovable  property,  a  harmonised  Union  framework  needs  to  be 
established  in  a  number  of  areas.  It  is  further  necessary  to  establish  harmonised 
standards in order to ensure that consumers looking for credit agreements relating to 
residential immovable property are able to do so confident in the knowledge that the 
institutions they interact with act in a professional and responsible manner. 

This Directive should improve conditions for the establishment and functioning of the 
internal  market  through  the  approximation  of  Member  States’  laws  and  the 
establishment  of  quality  standards  for  certain  services,  notably  with  regard  to  the 
distribution  and  provision  of  credit  through  creditors  and  credit  intermediaries.  The 
establishment  of  quality  standards for  services  for  the  provision of credit  necessarily 
involves  the  introduction  of  provisions  regarding  authorisation  and  prudential 
requirements. 

For  those  areas  not  covered  by  this  Directive,  Member  States  should  be  free  to 
maintain or introduce national legislation. Member States should be able to maintain 
or introduce national provisions in areas such as contract law relating to the validity of 
credit agreements, property valuation, land registration, contractual information, post-
contractual issues, and handling defaults. 

As consumers and enterprises are not in the same position, they do not need the same 
level of protection. While it is important to guarantee consumers’ rights by provisions 
that  cannot  be  derogated  from  by  contract,  it  is  reasonable  to  let  enterprises  and 
organisations  engage  in  other  agreements.  This  Directive  should  therefore  apply  to 
credit granted to consumers. Member States should, however, have the possibility to 
extend  the  scope  to  natural  or  legal  persons  that  are  not  consumers,  notably  micro-
enterprises, as defined by Commission Recommendation 2003/361/EC of 6 May 2003 
concerning the definition of micro, small and medium-sized enterprises26. 

The  objective  of  this  Directive  is  to  ensure  that  all  credits  provided  to  consumers 
benefit from a high level of protection. It should therefore apply to credits secured by 
real  estate,  or  credits  which  are  used  to  purchase  a  property  in  some  Member  States 
and  to  credits  for  the  renovation  of  residential  property  that  are  not  covered  by 
Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 
on  credit  agreements  for  consumers  and  repealing  Council  Directive  87/102/EEC27 
which  lays  down  rules  at  Union  level  concerning  consumer  credit  agreements. 
Furthermore, this Directive should not be applied to certain types of credit agreements 
where  the  credit  is  granted  by  an  employer  to  his  employees  under  certain 
circumstances, as already provided in Directive 2008/48/EC. 

(10)  This  Directive  should  not  apply  to  certain  credit  agreements  that  will  eventually  be 
repaid from the sale proceeds of an immovable property and whose primary objective 
is  to  facilitate  consumption,  such  as  equity  release  products  or  other  equivalent 
specialised  products.  Such  credit  agreements  have  specific  characteristics  which  are 
beyond the scope of this Directive. An assessment of the borrower’s creditworthiness, 
for  example,  is  irrelevant  since  the  payments  are  made  from  the  creditor  to  the 
borrower  rather  than  the  other  way  round.  Such  a  transaction  would  also  require, 
amongst other things, substantially different pre-contractual information. Furthermore, 

26 
27 

OJ L 124, 20.5.2003, p. 36. 
OJ L 133, 22.5.2008, p. 66. 

EN 

15 

   EN 

                                                 
other products, such as home reversions, which have comparable functions to reverse 
mortgages or lifetime mortgages do not involve the provision of credit and so would 
remain  outside  the  scope  of  this  Directive.  However  this  Directive  should  apply  to 
those  secured  loans  whose  primary  objective  is  to  facilitate  the  purchase  of 
an immovable property, including those loans that do not require the reimbursement of 
the capital or those whose purpose is to provide temporary financing between the sale 
of one immovable property and the purchase of another. 

to  residential 

(11)  For reasons of legal certainty, the Union framework in the area of credit agreements 
relating 
immovable  property  should  be  consistent  with  and 
complementary  to  other  Union  acts,  particularly  in  the  areas  of  consumer  protection 
and prudential supervision. Essential definitions of terms such as 'consumer', 'creditor', 
'credit intermediary', 'credit agreements' and 'durable medium' as well as key concepts 
used  in  standard  information  to  designate  the  financial  characteristics  of  the  credit, 
such  as  the  total  cost  of  the  credit  to  the  consumer,  the  total  amount  payable  by  the 
consumer,  the annual percentage rate of charge and the borrowing rate, should be in 
line  with  those  in  Directive  2008/48/EC  so  that  the  same  terminology  refers  to  the 
same  type  of  facts  irrespective  of  whether the  credit  is  a  consumer  credit  or  a  credit 
relating to residential immovable property. Member States should therefore ensure in 
the  transposition  of  this  Directive  that  there  is  a  consistency  of  application  and 
interpretation. 

(12) 

In order to ensure a consistent framework for consumers in the area of credit as well as 
to minimise the administrative burden for creditors and credit intermediaries, the core 
framework  of  this  Directive  should  follow  the  structure  of  Directive  2008/48/EC, 
notably  the  notions  that  information  included  in  advertising  concerning  credit 
agreements  relating  to  residential  immovable  property  should  be  provided  to  the 
consumer  by  means  of  a  representative  example,  that  detailed  pre-contractual 
information should be given to him by means of a standardised information sheet, that 
the consumer should receive adequate explanations before the conclusion of the credit 
agreement and that creditors should assess the consumer’s creditworthiness before the 
provision  of  a  loan.  Similarly,  non-discriminatory  access  for  creditors  to  relevant 
credit databases should also be ensured in order to achieve a level playing field with 
the  provisions  as  guaranteed  by  Directive  2008/48/EC.  Similarly  to  Directive 
2008/48/EC,  this  Directive  should  ensure  the  appropriate  authorisation,  registration 
and  supervision  of  all  creditors  providing  credit  agreements  relating  to  residential 
immovable property and should introduce requirements for the establishment of, and 
access to, out-of-court dispute resolution mechanisms. 

(13)  This  Directive  should  supplement  Directive  2002/65/EC  of  the  European  Parliament 
and  of  the  Council  of  23  September  2002  concerning  the  distance  marketing  of 
consumer  financial  services  and  amending  Council  Directive  90/619/EEC  and 
Directives 97/7/EC and 98/27/EC28 which requires that the consumer be informed of 
the existence or absence of a right of withdrawal and foresees a right of withdrawal. 
However,  while  Directive  2002/65/EC  foresees  the  possibility  for  the  supplier  to 
communicate  pre-contractual  information  after  the  conclusion  of  the  contract,  this 
would  be  inappropriate  for  contracts  for  credit  agreements  relating  to  residential 
immovable  property  given  the  significance  of  the  financial  commitment  for  the 

28 

OJ L 271, 9.10.2002, p. 16. 

EN 

16 

   EN 

                                                 
consumer. Furthermore, as foreseen in Directive 85/577/EEC of 20 December 1985 to 
protect the consumer in respect of contracts negotiated away from business premises 
(Doorstep Selling Directive)29, consumers should have a right of withdrawal for credit 
agreements  relating  to  residential  immovable  property  concluded  off-premises  and 
should be informed about the existence of that right. 

(14)  At  the  same  time,  it  is  important  take  into  consideration  the  specificities  of  credit 
agreements  relating  to  residential  immovable  property  which  justify  a  differentiated 
approach.  Given  the  nature  and  the  possible  consequences  of  a  credit  agreement 
relating to residential immovable property for the consumer, advertising materials and 
personalised  pre-contractual  information  should  include  specific  risk  warnings,  for 
instance  about  the  nature  and  implications  of  taking  out  a  security.  Following  what 
already  existed  as  a  voluntary  approach  by  the  industry  concerning  home  loans, 
general pre-contractual information should be made available at all times in addition to 
the personalised pre-contractual information. Furthermore, a differentiated approach is 
justifiable in order to take into consideration the lessons learnt from the financial crisis 
in order to ensure that loan origination takes place in a sound manner. In this respect, 
the  provisions  on  the  creditworthiness  assessment  should  be  strengthened  in 
comparison to consumer credit, more precise information should be provided by credit 
intermediaries  on  their  status  and  relationship  with  the  creditors  in  order  to  disclose 
potential  conflicts  of  interest,  and  all  actors  involved  in  the  origination  of  credit 
agreements  relating 
immovable  property  should  be  adequately 
to  residential 
authorised, registered and supervised. 

(15) 

Intermediaries  often  engage  in  more  activities  that  just  credit  intermediation,  in 
particular  insurance  intermediation  or  investment  services  provision.  This  Directive 
should therefore also ensure a degree of coherence with Directive 2002/92/EC of the 
European Parliament and of the Council of 9 December 2002 on insurance mediation30 
and  Directive  2004/39/EC  of  the  European  Parliament  and  of  the  Council  of 
21 April 2004  on  markets  in  financial  instruments  amending  Council  Directives 
85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and 
of the Council and repealing Council Directive 93/22/EEC31. In particular, prudential 
requirements for intermediaries should be broadly in line with Directive 2002/92/EC 
in order to simplify the process of establishing as a credit intermediary and operating 
cross-border. 

(16)  The  applicable  legal  framework  should  give  consumers  the  confidence  that  creditors 
and credit intermediaries are acting in the best interests of the consumer. A key aspect 
of  ensuring  such  consumer  confidence  is  the  requirement  to  ensure  a  high  degree  of 
fairness,  honesty  and  professionalism  in  the  industry.  While  this  Directive  should 
require relevant knowledge and competence to be proven at the level of the institution, 
Member States should be free to introduce or maintain such requirements applicable to 
individual natural persons. 

(17)  Creditors  and  credit  intermediaries  frequently  use  advertisements,  often  featuring 
special terms and conditions, to attract consumers to a particular product. Consumers 
should, therefore, be  protected  against unfair or misleading  advertising practices and 

29 
30 
31 

OJ L 372, 31.12.1985, p. 31. 
OJ L 9, 15.1.2003, p. 3. 
OJ L 145, 30.4.2004, p. 1. 

EN 

17 

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should  be  able  to  compare  advertisements.  Specific  provisions  on  the  advertising  of 
credit agreements relating to residential immovable property and a list of items to be 
included  in  advertisements  and  marketing  materials  directed  at  consumers  are 
necessary  to  enable  them  to  compare  different  offers.  Such  provisions  take  into 
account  the  specificities  of  credit  agreements  relating  to  residential  immovable 
property, for instance, the fact that if the loan repayments are not met, there is a risk of 
the  consumer  losing  the  property.  Member  States  should  remain  free  to  introduce  or 
maintain  disclosure  requirements  in  their  national  laws  regarding  advertising  which 
does not contain information on the cost of credit. 

(18)  Advertising tends to focus on one or several products in particular, while consumers 
should  be  able  to  make  their  decisions  in  full  knowledge  of  the  range  of  credit 
products  on  offer.  In  this  respect,  general  information  plays  an  important  role  in 
educating  the  consumer  in  the  broad  range  of  products  and  services  available  from 
a particular  creditor  or  credit  intermediary  and  the  key  features  thereof.  Consumers 
should  therefore  be  able  at  all  times  to  access  general  information  on  the  credit 
products available. They should further receive personalised information in good time 
prior to the conclusion of the credit agreement in order to enable them to compare and 
reflect on the characteristics of credit products. 

(19) 

In order to ensure a level playing field and in order for the consumer’s decision to be 
based  on  the  details  of  the  credit  products  on  offer  rather  than  on  the  distribution 
channel  through  which  such  credit  products  are  accessed,  consumers  should  receive 
information  on  the  credit  regardless  of  whether  they  are  dealing  directly  with 
a creditor or a credit intermediary. 

(20)  The Commission Recommendation 2001/193/EC on pre-contractual information to be 
given  to  consumers  by  lenders  offering  home  loans32  endorsed  the  Voluntary  Code 
agreed  in  2001  between  associations  and  federations  representing  lenders  and 
consumers  and  which  contains  a  European  Standardised  Information  Sheet  (ESIS). 
This  provides  information,  personalised  for  the  borrower,  on  the  credit  agreement 
being  provided.  In  its  Recommendation,  the  Commission  committed  to  monitoring 
compliance  with  the  Code  as  well  as  its  effectiveness,  and  to  consider  presenting 
binding  legislation  should  the  terms  of  the  Recommendation  not  be  fully  complied 
with. Evidence collected by the Commission has since highlighted the need to revise 
the content and presentation of the ESIS to ensure that it is clear, understandable and 
contains all information found to be relevant for consumers. The content and layout of 
the  ESIS  should  incorporate  the  necessary  improvements  identified  during  consumer 
testing in all Member States. The structure of the sheet (in particular, the order of the 
information items) should be revised, the wording should be more user-friendly, while 
sections,  such  as  'nominal  rate'  and  'annual  percentage  rate  of  charge',  should  be 
merged and new sections, such as 'external complaint body' and 'risks and warnings', 
should be added. 

(21) 

In order to ensure the fullest possible transparency and to prevent abuses arising from 
possible conflicts of interest when consumers use the services of credit intermediaries, 
the  latter  should  be  subject  to  certain  information  disclosure  obligations  prior  to  the 
performance  of  their  services.  Such  disclosures  should  include  information  on  their 

32 

OJ L 69, 10.3.2001, p. 25. 

EN 

18 

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identity  and  links  with  creditors,  for  instance  whether  they  are  considering  products 
from  a  broad  range  of  creditors  or  only  from  a  more  limited  number  of  creditors. 
Those credit intermediaries that are not tied to one creditor or one group of creditors 
should  further  disclose  to  consumers  information  on  the  existence  of  commissions 
payable by creditors for whom they are acting and the possible variations within those 
commissions. 

(22)  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. Creditors, and where the transaction is through a credit 
intermediary,  credit  intermediaries  should  provide  such  assistance  in  relation  to  the 
credit products which they offer to the consumer. The relevant information, as well as 
the essential characteristics of the products proposed, should therefore be explained to 
the consumer in a personalised manner so that the consumer can understand the effects 
which they may have on his economic situation. Member States could determine when 
and  to  what  extent  such  explanations  are  to  be  given  to  the  consumer,  taking  into 
account  the  particular  circumstances  in  which  the  credit  is  offered,  the  consumer’s 
need for assistance and the nature of individual credit products. 

(23) 

In  order  to  promote  the  establishment  and  functioning  of  the  internal  market  and  to 
ensure a high degree of protection for consumers throughout the Union, it is necessary 
to  ensure  the  comparability  of  information  relating  to  annual  percentage  rates  of 
charge  throughout  the  Union.  The  total  cost  of  the  credit  to  the  consumer  should 
comprise  all  the  costs  that  the  consumer  has  to  pay  in  connection  with  the  credit 
agreement, except for notarial costs. It should therefore include interest, commissions, 
taxes, fees for credit intermediaries and any other fees as well as the cost of insurance 
or other ancillary products, where these are obligatory in order to obtain the credit on 
the terms and conditions marketed. As the annual percentage rate of charge can at the 
pre-contractual  stage be  indicated only through an example, such an 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.  Given  the  complexities  of  calculating  an  annual  percentage  rate  of 
charge  (for  instance,  for  credits  based  on  variable  interest  rates  or  non-standard 
amortisation)  and  in  order  to  be  able  to  accommodate  product  innovation,  technical 
regulatory standards could be employed to amend or specify the method of calculation 
of the  annual percentage  rate of  charge. The definition of and methodology used for 
calculating the annual percentage rate of charge in this Directive should be the same as 
those  in  Directive  2008/48/EC  in  order  to  facilitate  consumer  understanding  and 
comparison.  Those  definitions  and  methodologies  may,  however,  differ  in  the  future 
should  Directive  2008/48/EC  be  modified  at  a  later  date.  Member  States  are  free  to 
maintain or introduce prohibitions on unilateral changes to the borrowing rate by the 
creditor. 

(24)  An assessment of creditworthiness should take into consideration all necessary factors 
that  could  influence  a  consumer’s  ability  to  repay  over  the  lifetime  of  the  loan 
including,  but  not  limited  to,  the  consumer’s  income,  regular  expenditures,  credit 
score, past credit history, ability to handle interest rate adjustments, and other existing 
credit  commitments.  Additional  provisions  may  be  necessary  to  further  elaborate  on 
the  different  elements  that  may  be  taken  into  consideration  in  a  creditworthiness 
assessment.  Member  States  may  issue  guidance  on  the  method  and  criteria  to  assess 

EN 

19 

   EN 

a consumer’s creditworthiness, for example by setting limits on loan-to-value or loan-
to-income ratios. 

(25)  A  negative  creditworthiness  assessment  should  indicate  to  the  creditor  that  the 
consumer is unable to afford the credit and as a consequence, the creditor should not 
grant  the  credit.  Such  a  negative  outcome  may  derive  from  a  wide  range  of  reasons, 
including but not limited to the consultation of a database or a negative credit score. 
A positive  creditworthiness  assessment  should  not  constitute  an  obligation  for  the 
creditor to provide credit. 

(26)  Consumers  should  provide  all  available  relevant  information  on  their  financial 
situation  and  personal  circumstances  to  the  creditor  or  intermediary  in  order  to 
facilitate  the  creditworthiness  assessment.  The  consumer  should  not,  however,  be 
penalised where he is not in a position to provide certain information or assessments of 
the  future  evolution  of  his  financial  situation.  In  situations  where  consumers 
knowingly  provide  incomplete  or  inaccurate  information,  Member  States  should  be 
able to determine the appropriate penalties. 

(27)  Consultation  of  a  credit  database  is  a  useful  element  in  the  assessment  of 
creditworthiness. Some Member States require creditors to assess the creditworthiness 
of consumers on the basis of a consultation of the relevant database. Creditors should 
also  be  able  to  consult  the  credit  database  over  the  lifetime  of  the  loan  in  order  to 
identify and assess the potential for default. In the event that such a potential is evident 
or  objectively  demonstrated,  the  creditor  should  contact  the  consumer  to  discuss  the 
different options to avoid the possibility of default, such as a rescheduling of the loan. 
In any event, the creditor should not consider withdrawing the credit without having 
first explored all possible alternatives with the consumer to avoid default. Pursuant 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 data33, consumers should be informed by creditors of the 
consultation of the credit database prior to its consultation, and should have the right 
to  access  the  information  held  on  them  in  such  a  credit  database  in  order  to,  where 
necessary, rectify, erase or block the personal data concerning them processed therein 
where it is inaccurate or has been unlawfully processed. 

(28)  To prevent any distortion of competition among creditors, it should be ensured that all 
creditors  (including  credit  institutions  or  non-credit  institutions  providing  credit 
agreements  relating  to  residential  immovable  property)  have  access  to  all  public  and 
private  credit  databases  concerning  consumers  under  non-discriminatory  conditions. 
Such  conditions  should  not  therefore  include  a  requirement  to  be  established  as 
a credit institution. Access conditions, such as the costs of access or requirements for 
any  request  for  information  to  be  based  upon  a  request  for  credit  would  continue  to 
apply. Member States are free to determine whether, within their jurisdictions, credit 
intermediaries may also have access to such databases. 

(29)  Where a decision to reject an application for credit is based on data obtained through 
the consultation of a database or the lack of data therein, the creditor should inform the 
consumer  thereof,  of  the  name  of  the  database  consulted  and  of  any  other  elements 

33 

OJ L 281, 23.11.1995, p. 31. 

EN 

20 

   EN 

                                                 
required by Directive 95/46/EC so as to enable the consumer to exercise his right to 
access and, where necessary, rectify, erase or block personal data concerning him and 
processed therein. Where a decision to reject an application for credit is based on an 
automated  decision  or  on  systematic  methods  such  as  credit  scoring  systems,  the 
creditor  should  inform  the  consumer  thereof  and  explain  the  logic  involved  in  the 
decision  and  of  the  arrangements  enabling  the  consumer  to  request  the  automated 
decision  to  be  reviewed  manually.  However,  the  creditor  should  not  be  required  to 
give such information when to do so would be prohibited by other Union legislation 
such as legislation on money laundering or the financing of terrorism. Neither should 
such  information  be  provided  where  to  do  so  would  be  contrary  to  the  objectives  of 
public  policy  or  public  security  such  as  the  prevention,  investigation,  detection  or 
prosecution of criminal offences. 

(30)  This Directive addresses the use of personal data in the context of the assessment of 
the  consumer’s  creditworthiness.  In  order  to  ensure  the  protection  of  personal  data, 
Directive  95/46/EC  applies  to  the  data  processing  activities  carried  out  within  the 
context of such assessments.. 

(31) 

In order to be in a position to understand the nature of the service, consumers should 
be made aware of what constitutes a personalised recommendation on suitable credit 
agreements for that consumer’s needs and financial situation ('advice') and when it is 
being provided and when it is not. Those providing advice should comply with general 
standards  in  order  to  ensure  that  the  consumer  is  presented  with  a  range  of  products 
suitable  for  his  needs  and  circumstances.  That  service  should  be  based  on  a  fair  and 
sufficiently  wide-ranging  analysis  of  the  products  available  on  the  market,  and  on 
a close  inspection  of  the  consumer’s  financial  situation,  preferences  and  objectives. 
Such  an  assessment  should  be  based  on  up-to-date  information  and  reasonable 
assumptions  on  the  consumer’s  circumstances  during  the  lifetime  of  the  loan. 
Member States  may  clarify  how  the  suitability  of  a  given  product  for  a  consumer 
should be assessed in the context of the provision of advice. 

(32)  A consumer’s ability to repay his credit prior to the expiry of his credit agreement may 
play  an  important  role  in  promoting  competition  in  the  single  market  and  the  free 
movement of EU citizens. However, substantial differences exist between the national 
principles  and  conditions  under  which  consumers  have  the  ability  to  repay  and  the 
conditions  under  which  such  early  repayment  can  take  place.  Whilst  recognising  the 
diversity in mortgage funding mechanisms and the range of products available, certain 
standards with regard to early repayment of credit are essential at Union level in order 
to ensure that consumers have the possibility to discharge their obligations before the 
date  agreed  in  the  credit  agreement  and  the  confidence  to  shop  around  for  the  best 
products  to  meet  their  needs.  Member  States  should  therefore  ensure,  either  by 
legislation  or  by  means  of  contractual  clauses,  that  consumers  have  a  statutory  or 
contractual  right  to  early  repayment;  nevertheless,  Member  States  should  be  able  to 
define  the  conditions  for  the  exercise  of  such  a  right.  These  conditions  may  include 
time limitations on the exercise of the right, different treatment depending on the type 
of  the  borrowing  rate,  whether  fixed  or  variable,  restrictions  with  regard  to  the 
circumstances  under  which  the  right  may  be  exercised.  Member  States  could  also 
provide  that  the  creditor  should  be  entitled  to  fair  and  objectively  justified 
compensation  for  potential  costs  directly  linked  to  early  repayment  of  the  credit.  In 
any event if the early repayment falls within a period for which the borrowing rate is 
fixed, exercise of the right may be made subject to the existence of a special interest 

EN 

21 

   EN 

on  the  part  of  the  consumer.  Such  special  interest  may  for  example  occur  in  case  of 
divorce  or  unemployment.  Where  a  Member  State  chooses  to  lay  down  such 
conditions,  these  should  not  make  the  exercise  of  the  right  excessively  difficult  or 
onerous for the consumer. 

(33)  Although  credit  intermediaries  play  a  central  role  in  the  distribution  of  credit 
agreements  relating  to  residential  immovable  property  in  the  Union,  substantial 
differences  remain  between  national  provisions  on  the  conduct  of  business  and 
supervision of credit intermediaries which create barriers to the taking-up and pursuit 
of the activities of credit intermediaries in the internal market. The inability of credit 
intermediaries  to  operate  freely  throughout  the  Union  hinders  the  proper  functioning 
of  the  single  market  in  credit  agreements  relating  to  residential  immovable  property. 
While recognising the diversity in the types of actor involved in credit intermediation, 
certain  standards  at  Union  level  are  essential  in  order  to  ensure  a  high  level  of 
professionalism and service. 

(34)  Credit  intermediaries  should  be  registered  with  the  competent  authority  of  the 
Member State where they have their residence or their head office, provided that they 
have been authorised in accordance with strict professional requirements in relation to 
their  competence,  good  repute,  and  professional  indemnity  cover.  With  a  view  to 
promoting consumer confidence in credit intermediaries, Member States should ensure 
that authorised credit intermediaries are subject to ongoing and thorough supervision 
by their home Member State competent authority. Such requirements should apply at 
least at the level of the institution; however, Member States may clarify whether such 
requirements  for  authorisation  and  subsequent  registration  apply  to  individual 
employees within the credit intermediary. 

(35)  Such registration and authorisation requirements should allow credit intermediaries to 
operate  in  other  Member  States  in  accordance  with  the  principles  of  freedom  of 
establishment  and  freedom  to  provide  services,  provided  that  an  appropriate 
notification procedure has been followed between the competent authorities. Even in 
cases where Member States decide to register and authorise all individual staff within 
the credit intermediary, the notification of the intention to provide services should be 
on the basis of the credit intermediary rather than the individual employee. 

(36) 

In  order  to  ensure  a  level  playing  field  between  creditors  and  promote  financial 
stability,  and  pending  further  harmonisation,  Member  States  should  ensure  that 
appropriate measures are in place for the authorisation, registration and supervision of 
non-credit  institutions  providing  credit  agreements  relating  to  residential  immovable 
property.  Detailed  conditions  should  not  be  laid  down  in  this  Directive  for  the 
authorisation, registration or supervision of creditors providing such credit agreements 
and that are not credit institutions as defined in Directive 2006/48/EC of the European 
Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of 
the business of credit institutions34 for reasons of proportionality; the number of such 
institutions  operating  in  the  EU  at  present  is  limited  as  is  their  market  share  and  the 
number  of  Member  States  in  which  they  are  active,  particularly  since  the  financial 
crisis. Nor should the introduction of a 'passport' for such institutions be provided for 
in this Directive for the same reason. 

34 

OJ L 177, 30.6.2006, p. 1. 

EN 

22 

   EN 

                                                 
(37)  Member States should lay down rules on penalties applicable to infringements of the 
national  provisions  adopted  pursuant  to  this  Directive  and  ensure  that  they  are 
implemented. While the choice of penalties remains within the discretion of Member 
States, the penalties provided for should be effective, proportionate and dissuasive. 

(38)  Consumers  should  have  access  to  out-of-court  complaint  and  redress  procedures  for 
the  settlement  of  disputes  arising  from  the  rights  and  obligations  set  out  in  this 
Directive  between  providers  of  credit  agreements  relating  to  residential  immovable 
property and consumers as well as between credit intermediaries and consumers. 

(39) 

(40) 

(41) 

(42) 

In  order  to  take  account  of  developments  in  the  markets  for  credit  relating  to 
residential  immovable  property  or  in  the  evolution  of  credit  products  as  well  as 
economic developments, such as inflation, and in order to provide further explanations 
on  how  to  address  certain  of  the  requirements  contained  in  this  Directive,  the 
Commission  should  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 290 of the Treaty on the Functioning of the European Union. In particular, the 
Commission  should  be  empowered  to  adopt  delegated  acts  to  specify  the  details 
concerning  the  professional  requirements  applicable  to  creditors’  staff  and  credit 
intermediaries, the criteria used for assessing the creditworthiness of the consumer and 
in  ensuring  that  credit  products  are  not  unsuitable  for  the  consumer,  and  further 
harmonisation  of  key  terms  such  as  'default'  the  registration  criteria  and  data 
processing conditions to be applied to credit databases. 

In  order  to  take  account  of  developments  in  the  markets  for  credit  relating  to 
residential  immovable  property,  including  the  range  of  products  available,  the 
Commission  should  be  empowered  to  adopt  delegated  acts  in  accordance  with 
Article 290  of  the  Treaty  on  the  Functioning  of  the  European  Union  to  amend  the 
content of the standard information items to be included in advertising, the content and 
format  of  the  European  Standardised  Information  Sheet  (ESIS),  the  content  of  the 
information disclosures by credit intermediaries, the formula and the assumptions used 
to  calculate  the  annual  percentage  rate  of  charge  and  the  criteria  to  be  taken  into 
account for the assessment of the consumer’s creditworthiness. 

In  order  to  take  account  of  economic  developments,  such  as  inflation  and 
developments  in  markets  for  credit  agreements  related  to  residential  immovable 
property,  the  Commission  should  be  empowered  to  stipulate  the  minimum  monetary 
amount of the professional indemnity insurance or comparable guarantee with regard 
to credit intermediaries by adopting regulatory technical standards. 

In order to facilitate the ability of credit intermediaries to provide their services on a 
cross-border  basis,  for  purposes  of  cooperation,  information  exchange  and  dispute 
resolution between competent authorities, the competent authorities responsible for the 
authorisation and supervision of credit intermediaries should be those acting under the 
auspices of the EBA, as set out in Article 4(2) of Regulation (EU) No 1093/2010 of 
the  European  Parliament  and  of  the  Council  of  24  November  2010  establishing 
a European Supervisory Authority (European Banking Authority)35. 

(43)  The  European  Parliament  and  the  Council  should  have  two  months  from  the  date  of 
notification to object to a delegated act. At the initiative of the European Parliament or 

35 

OJ L 331, 15.12.2010, p. 12. 

EN 

23 

   EN 

                                                 
the Council, it should be possible to prolong that period by one month with regard to 
significant  areas  of  concern.  It  should  also  be  possible  for  the  European  Parliament 
and  the  Council  to  inform  the  other  institutions  of  their  intention  not  to  raise 
objections. 

(44)  The efficient functioning of this Directive will need to be reviewed, as will progress 
on the establishment of an internal market with a high level of consumer protection for 
credit agreements relating to residential immovable property. The Commission should 
therefore  review  the  Directive  five  years  after  the  deadline  for  its  transposition.  The 
review should include, among other things, an analysis of the evolution of the market 
for  non-credit  institutions  providing  credit  agreements  relating  to  residential 
immovable property and an assessment on the need for further measures, including a 
passport for such non-credit institutions, an examination of the necessity to introduce 
rights  and  obligations  with  regard  to  the  post-contractual  stage  of  credit  agreements, 
and  an  assessment  of  whether  an  extension  of  the  scope  to  include  lending  to  small 
companies is warranted. 

(45)  Action by Member States alone is likely to result in different sets of rules, which may 
undermine or create new obstacles to the functioning of the internal market. Since an 
efficient  and  competitive  internal  market  in  credit  agreements  relating  to  residential 
immovable  property  with  a  high  level  of  consumer  protection  cannot  be  sufficiently 
achieved  by  Member  States  and  can  therefore  by  reason  of  the  effectiveness  of  the 
action,  be  better  achieved  at  Union  level,  the  Union  may  adopt  measures,  in 
accordance with the principle of subsidiarity  as  set out in Article  5  of  the  Treaty.  In 
accordance  with  the  principle  of  proportionality,  as  set  out  in  that  Article,  this 
Directive does not go beyond what is necessary in order to achieve those objectives. 

(46) 

the  Interinstitutional  Agreement  on  better 
In  accordance  with  point  34  of 
law-making36,  Member  States  are  encouraged  to  draw  up,  for  themselves  and  in  the 
interest  of  the  Union,  their  own  tables  illustrating,  as  far  as  possible,  the  correlation 
between this Directive and the transposition measures, and to make them public, 

HAVE ADOPTED THIS DIRECTIVE: 

Chapter 1 
Subject matter, scope, definitions and competent authorities 

Article 1 
Subject matter 

The  purpose  of  this  Directive  is  to  lay  down  a  framework  for  certain  aspects  of  the  laws, 
regulations and administrative provisions of the Member States concerning credit agreements 
relating  to  residential  immovable  property  for  consumers  and  concerning  certain  aspects  of 
the prudential and supervisory requirements for credit intermediaries and creditors. 

36 

OJ C 321, 31.12.2003, p. 1. 

EN 

24 

   EN 

                                                 
1. 

This Directive shall apply to the following credit agreements: 

Article 2 
Scope 

(a)  Credit  agreements  which  are  secured  either  by  a  mortgage  or  by  another 
comparable  security  commonly  used  in  a  Member  State  on  residential 
immovable  property  or  secured  by  a  right  related  to  residential  immovable 
property. 

(b)  Credit agreements the purpose of which is to acquire or retain property rights 

in land or in an existing or projected residential building. 

(c)  Credit  agreements  the  purpose  of  which  is  the  renovation  of  the  residential 
immovable property a person owns or aims to acquire, which are not covered 
by  Directive  2008/48/EC  of  the  European  Parliament  and  of  the  Council  of 
23 April 2008. 

2. 

This Directive shall not apply to: 

(a)  Credit  agreements  which  will  eventually  be  repaid  from  the  sale  proceeds  of 

an immovable property. 

(b)  Credit agreements where the credit is granted by an employer to his employees 
as a secondary activity where such a credit agreement is offered free of interest 
or  at  annual  percentage  rates  of  charge  lower  than  those  prevailing  on  the 
market and not offered to the public generally. 

Article 3 
Definitions 

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

(a) 

(b) 

(c) 

(d) 

(e) 

'Consumer' means a consumer as defined in Article 3(a) of Directive 2008/48/EC. 

'Creditor'  means  a  natural  or  legal  person  who  grants  or  promises  to  grant  credit 
within the meaning of Article 2 in the course of his trade, business or profession. 

'Credit  agreement'  means  an  agreement  whereby  a  creditor,  directly  or  through 
a credit intermediary, grants or promises to grant, to a consumer, a credit within the 
meaning  of  Article 2  in  the  form  of  a  deferred  payment,  loan  or  other  similar 
financial accommodation. 

'Ancillary service' means a financial service offered to the consumer by the creditor 
or credit intermediary in conjunction with the credit agreement. 

'Credit intermediary' means a natural or legal person who is not acting as a creditor 
and who, in the course of his trade, business or profession, for a fee, which may take 
a pecuniary form or any other agreed form of financial consideration: 

(i) 

offers credit agreements within the meaning of Article 2 to consumers; 

EN 

25 

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(ii) 

assists  consumers  by  undertaking  preparatory  work  in  respect  of  credit 
agreements  within  the  meaning  of  Article  2  other  than  as  referred  to  in 
point (i); 

(iii)  concludes  credit  agreements  within  the  meaning  of  Article  2  with  consumers 

on behalf of the creditor. 

'Tied  credit  intermediary'  means  any  credit  intermediary  who  acts  on  behalf  of  and 
under the full responsibility of only one creditor or one group. 

'Group'  means,  for  the  purpose  of  this  Directive,  creditors  which  are  joined  for  the 
purposes of consolidated accounts, as defined in Directive 83/349/EEC37. 

'Credit  institution'  means  credit  institution  as  defined  in  Article 4(1)  of  Directive 
2006/48/EC. 

'Non-credit institution' means any natural or legal person who grants or promises to 
grant  credit  within  the  meaning  of  Article 2  in  the  course  of  his  trade,  business  or 
profession and is not a credit institution. 

'Staff'  means  any  employees  of  the  creditor  or  credit  intermediary  having  contacts 
with consumers and who are engaged in the activities covered by this Directive. 

'Total  cost  of  the  credit  to  the  consumer'  means  the  total  cost  of  the  credit  to  the 
consumer as defined in Article 3(g) of Directive 2008/48/EC. 

'Total  amount  payable  by  the  consumer'  means  the  total  amount  payable  by  the 
consumer as defined in Article 3(h) of Directive 2008/48/EC. 

'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,  where  applicable, 
including the costs referred to in Article 12(2). 

'Borrowing  rate'  means  the  borrowing  rate  as  defined  in  Article  3(j)  of  Directive 
2008/48/EC. 

'Creditworthiness  assessment'  means  the  evaluation  of  a  consumer’s  ability  to  meet 
his debt obligations. 

'Durable  medium'  means  durable  medium  as  defined  in  Article  3(m)  of  Directive 
2008/48/EC. 

(f) 

(g) 

(h) 

(i) 

(j) 

(k) 

(l) 

(m) 

(n) 

(o) 

(p) 

(q) 

'Home Member State' means: 

(i)  where the creditor or credit intermediary is a natural person, the Member State 
in which his residence is situated and in which he carries on his business; 

(ii)  where the creditor or credit intermediary is a legal person, the Member State in 
which  its  registered  office  is  situated  or,  if  under  national  law  it  has  no 
registered office, the Member State in which its head office is situated. 

37 

OJ L 193, 18.7.1993, p. 1. 

EN 

26 

   EN 

                                                 
(r) 

'Host  Member  State'  means  the  Member  State  in  which  the  creditor  or  credit 
intermediary has a branch or provides services. 

Article 4 
Competent authorities 

1. 

Member  States  shall  designate  the  competent  authorities  empowered  to  ensure 
implementation of this Directive and shall ensure that they are granted all the powers 
necessary for the performance of their duties. 

Member States shall ensure that the authorities designated as competent for ensuring 
the implementation of Articles 18, 19, 20 and 21 of this Directive are one of those 
competent  authorities  included  in  Article  4(2)  of  Regulation  (EU)  No  1093/2010 
establishing a European Supervisory Authority (European Banking Authority). 

Member  States  shall  inform  the  Commission  of  the  designation  of  the  competent 
authorities,  indicating  any  division  of  the  respective  duties  between  different 
competent authorities. 

2. 

Where  there  is  more  than  one  competent  authority  on  its  territory,  a  Member  State 
shall ensure that those authorities collaborate closely so that they can discharge their 
respective duties effectively. 

Chapter 2 
Conditions applicable to creditors and credit intermediaries 

Article 5 
Conduct of business obligations when providing credit to consumers 

1. 

2. 

Member States shall require that, when granting, intermediating or advising on credit 
and,  where  appropriate,  ancillary  services  to  consumers,  the  creditor  or  the  credit 
intermediary  acts  honestly,  fairly  and  professionally  in  accordance  with  the  best 
interests of the consumer. 

Member States shall ensure that the manner in which creditors remunerate their staff 
and the relevant credit intermediaries and the manner in which credit intermediaries 
remunerate  their  staff  do  not  impede  compliance  with  the  obligation  to  act  in 
accordance with the best interests of the consumer, as referred to in paragraph 1. 

Article 6 
Minimum competence requirements 

1. 

Home Member States shall ensure that: 

(a)  The staff of creditors and credit intermediaries possess an appropriate level of 
knowledge  and  competence  in  relation  to  the  offering  or  granting  of  credit 
agreements  within  the  meaning  of  Article  2,  or  the  activity  of  credit 
intermediation  as  defined  in  Article  3(e).  Where  the  conclusion  of  a  credit 

EN 

27 

   EN 

agreement includes an ancillary service related to it, in particular insurance or 
investment  services,  they  shall  also  possess  appropriate  knowledge  and 
competence  in  relation  to  that  ancillary  service  in  order  to  satisfy  the 
requirements  set  out  in  Article  19  of  Directive  2004/39/EC  and  Article  4  of 
Directive 2002/92/EC. 

(b)  The  natural  persons  within 

the  management  of  creditors  and  credit 
intermediaries  who  are  responsible  for  or  have  a  role  in  the  intermediation, 
advice or approval of the credit agreement, possess appropriate knowledge and 
competence in relation to credit agreements. 

(c)  Creditors and credit intermediaries are monitored in order to assess whether the 
requirements referred to in paragraph 1, points (a) and (b), are complied with 
on a continuing basis. 

Home  Member  States  shall  ensure  that  the  appropriate  level  of  knowledge  and 
competence is determined on the basis of recognised qualifications or experience. 

Home Member States shall make public the criteria they have established in order for 
credit intermediaries or creditors’ staff to meet their competence requirements. Such 
criteria shall include a list of any recognised qualifications. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the  conditions  of  Articles  27  and  28,  to  specify  the  requirements  provided  in 
paragraph  1  and  2  of  this  Article,  and  in  particular,  the  necessary  requirements  for 
appropriate knowledge and competence. 

Chapter 3 
Information and practices 
preliminary to the conclusion of the credit agreement 

2. 

3. 

4. 

Article 7 
General provisions applicable to advertising and marketing 

Member States shall require that any advertising and marketing communications concerning 
credit agreements as set out in Article 2 are fair, clear and not misleading within the meaning 
of Articles 6 and 7 of Directive 2005/29/EC of the European Parliament and of the Council of 
11  May  2005  concerning  unfair  business-to-consumer  commercial  practices  in  the  internal 
market38. In particular, wording that may create false expectations for a consumer regarding 
the availability or the cost of a credit shall be prohibited. 

Article 8 
Standard information to be included in advertising 

1. 

Member States shall ensure that any advertising concerning credit agreements as set 
out in Article 2 which indicates an interest rate or any figures relating to the cost of 

38 

OJ L 149, 11.6.2005, p. 22. 

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28 

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the credit to the consumer shall include the standard information in accordance with 
this Article. 

2. 

The  standard  information  shall  specify  the  following  in  a  clear,  concise  and 
prominent way by means of a representative example: 

(a) 

the identity of the creditor or, where applicable, the credit intermediary; 

(b) 

that  the  product  advertised  is  a  credit  agreement  and,  where  applicable,  is 
secured either by a mortgage or another comparable security commonly used in 
a Member State  on  residential  immovable  property  or  by  a  right  related  to 
residential immovable property; 

(c) 

the borrowing rate, indicating whether this is fixed or variable or both, together 
with  particulars  of  any  charges  included  in  the  total  cost  of  the  credit  to  the 
consumer; 

(d) 

the total amount of credit; 

(e) 

the annual percentage rate of charge; 

(f) 

the duration of the credit agreement; 

(g) 

the amount of the instalments; 

(h) 

the total amount payable by the consumer; 

(i) 

a  warning,  where  applicable,  concerning  the  risk  of  losing  the  immovable 
property  in  the  event  of  non-observance  of  the  commitments  linked  to  the 
credit  agreement  when  the  credit  is  secured  by  a  mortgage  or  another 
comparable  security  commonly  used  in  a  Member  State  on  residential 
immovable  property  or  secured  by  a  right  related  to  residential  immovable 
property. 

The  standard  information  shall  be  easily  legible  or  clearly  audible  as  appropriate, 
depending on the medium used for advertising and marketing. 

Where  the  conclusion  of  a  contract  regarding  an  ancillary  service  relating  to  the 
credit agreement, in particular insurance, is compulsory in order to obtain the credit 
or  to  obtain  it  on  the  terms  and  conditions  marketed,  and  the  cost  of  that  service 
cannot be determined in advance, the obligation to enter into that contract shall also 
be stated in a clear, concise and prominent way, together with the annual percentage 
rate of charge. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the  conditions  of  Articles  27  and  28,  to  further  specify  the  list  of  standard 
information items to be included in advertising. 

In  particular,  the  Commission,  when  adopting  such  delegated  acts  shall  amend, 
where necessary, the list of the standard information items laid down in paragraphs 
2(a) to (i) of this Article. 

3. 

4. 

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29 

   EN 

5. 

This Article shall be without prejudice to Directive 2005/29/EC. 

Article 9 
Pre-contractual information 

1. 

Member States shall ensure that general information about credit agreements is made 
available  by  creditors  or,  where  applicable,  credit  intermediaries  at  all  times  in 
a durable medium or in electronic form. 

The general information shall include at least the following: 

(a) 

identity  and  the  geographical  address  of  the  creditor  as  well  as,  where 
applicable,  the  identity  and  geographical  address  of  the  credit  intermediary 
involved; 

(b)  purposes for which the credit may be used; 

(c) 

forms of surety; 

(d) 

the duration of the credit agreements; 

(e) 

(f) 

(g) 

(h) 

descriptions  of  the  types  of  credit  available,  with  a  short  description  of  the 
characteristics  of  fixed  and  variable  rate  products, 
including  related 
implications for the consumer; 

indication  of  the  currency  or  currencies  in  which  credits  are  available, 
including an explanation of the implications for the consumer where the credit 
is denominated in a foreign currency; 

an  indicative  example  of  the  total  cost  of  credit  for  the  consumer  and  annual 
percentage rate of charge; 

the  different  options  available  for  reimbursing  the  credit  to  the  creditor 
(including  the  number,  frequency  and  amount  of  the  regular  repayment 
instalments); 

(i)  whether  there  is  a  possibility  of  early  repayment  and,  where  applicable, 

a description of the conditions attached to early repayment; 

(j)  whether  a  valuation  of  the  property  is  necessary  and,  where  applicable,  by 

whom it should be carried out; 

(k)  details on how to obtain information on tax relief on credit agreement interest 

or other public subsidies. 

2. 

Member  States  shall  ensure  that  the  creditor  and,  where  applicable,  the  credit 
intermediary,  without  undue  delay  after  the  consumer  has  given  the  necessary 
information  on  his  needs,  financial  situation  and  preferences  in  accordance  with 
Article  14,  provides  the  consumer  with  the  personalised  information  needed  to 
compare  the  credits  available  on  the  market,  assess  their  implications  and  take 
an informed decision on whether to conclude a credit agreement. Such information, 

EN 

30 

   EN 

on paper or on another durable medium, shall be provided by means of the European 
Standardised Information Sheet ('ESIS'), as set out in Annex II. 

Member States shall ensure that when an offer binding on the creditor is provided to 
the consumer, it shall be accompanied by an ESIS. In such circumstances, Member 
States shall ensure that the credit agreement cannot be concluded until the consumer 
has  had  sufficient  time  to  compare  the  offers,  assess  their  implications  and  take 
an informed  decision  on  whether  to  accept  an  offer,  regardless  of  the  means  of 
conclusion of the contract. 

The creditor and, where applicable, the credit intermediary shall be deemed to have 
fulfilled  the  requirements  on  information  provision  to  the  consumer  prior  to  the 
conclusion  of  a  distance  contract  as  set  out  in  Article  3  of  Directive  2002/65/EC 
where they have supplied the ESIS. 

Any  additional  information  which  the  creditor  or  where  applicable,  the  credit 
intermediary,  may  provide  to  the  consumer  shall  be  given  in  a  separate  document 
which may be annexed to the ESIS. 

3. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the  conditions  of  Articles  27  and  28,  to  amend  the  standard  information  items  laid 
down in paragraph 1 of this Article and the content and format of the ESIS set out in 
Annex II. 

In particular, such delegated acts shall, where necessary: 

(a) 

amend  the  list  of  the  standard  information  items  laid  down  in  paragraph  1  of 
this Article; 

(b)  delete any of the information items laid down Annex II; 

(c)  make additions to the list of information items laid down in Annex II; 

(d) 

amend the presentation of the contents of the ESIS as laid down in Annex II; 

(e) 

elaborate  on  the  instructions  for  the  completion  of  the  ESIS  as  laid  down  in 
Annex II. 

In  the  case  of  voice  telephony  communications,  as  referred  to  in  Article 3(3)  of 
Directive  2002/65/EC,  the  description  of  the  main  characteristics  of  the  financial 
service  to  be  provided  pursuant  to  the  second  indent  of  Article 3(3)(b)  of  that 
Directive shall include at least the items referred to in Part A sections (2), (3), (4) and 
(5) of Annex II. 

Member States shall ensure that the creditor or credit intermediary, upon request of 
the consumer, provides the consumer with a copy of the draft credit agreement free 
of charge. This provision shall not apply in cases where the creditor is unwilling, at 
the time of the request, to proceed to the conclusion of the credit agreement with the 
consumer. 

4. 

5. 

EN 

31 

   EN 

Article 10 
Information requirements concerning credit intermediaries 

1. 

Prior  to  the  performance  of  any  of  the  services  listed  in  Article  3(e),  a  credit 
intermediary shall provide the consumer with at least the following information: 

(a) 

identity and the geographical address of the credit intermediary; 

(b) 

the register in which he has been included and the means for verifying that he 
has been registered; 

(c)  where he is acting as a tied credit intermediary he shall identify himself as such 
and, at the consumer’s request, provide the names of the creditor(s) for which 
he is acting; 

(d)  whether he has a holding, direct or indirect, representing more than 10 % of the 

voting rights or of the capital in a given creditor; 

(e)  whether  a  given  creditor  or  parent  undertaking  of  a  given  creditor  has 
a holding, direct or indirect, representing more than 10 % of the voting rights 
or of the capital in the credit intermediary; 

(f) 

(g) 

the fee, where applicable, payable by the consumer to the credit intermediary 
for his services; 

the  procedures  allowing  consumers  and  other  interested  parties  to  register 
complaints  about  credit  intermediaries  and,  where  appropriate,  the  means  by 
which  recourse  to  the  out-of-court  complaint  and  redress  procedures  can  be 
sought; 

(h) 

for those credit intermediaries that are not tied, the existence of commissions, 
where  applicable,  payable  by  the  creditor  to  the  credit  intermediary  for  his 
services. 

Credit  intermediaries  who  are  not  tied  shall,  at  the  consumer’s  request,  provide 
information  on  the  variation  in  levels  of  commission  payable  by  the  different 
creditors  providing  the  credit  agreements  being  offered  to  the  consumer.  The 
consumer shall be informed that he has the right to request such information. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the conditions of Articles 27 and 28, to update the list of information items on credit 
intermediaries  to  be  provided  to  the  consumer,  as  laid  down  in  paragraph  1  of  this 
Article. 

In  particular,  the  Commission,  when  adopting  such  delegated  acts  shall  amend, 
where necessary, the information items laid down in paragraph 1 of this Article. 

In  order  to  ensure  uniform  conditions  of  application  of  paragraph  1  of  this  Article, 
powers  are  conferred  on  the  Commission  to  determine,  where  necessary,  a 
standardised  format  and  the  presentation  of  the  information  items  set  out  in 
paragraph 1 of this Article. 

2. 

3. 

4. 

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32 

   EN 

Article 11 
Adequate explanations 

Member States shall ensure that creditors and, where applicable, credit intermediaries provide 
adequate explanations to the consumer on the proposed credit agreement(s) and any ancillary 
service(s),  in  order  to  place  the  consumer  in  a  position  enabling  him  to  assess  whether  the 
proposed  credit  agreements  are  adapted  to  his  needs  and  financial  situation.  An  adequate 
explanation  shall  include  the  provision  of  personalised  information  on  the  characteristics  of 
the credits on offer, without however formulating any recommendation. Creditors and, where 
applicable, credit intermediaries shall accurately assess the level of knowledge and experience 
with  credit  of  the  consumer  by  any  means  necessary  so  as  to  enable  the  creditor  or  the 
intermediary  to  determine  the  level  of  explanations  to  be  given  to  the  consumer  and  adjust 
such explanations accordingly. 

Such  adequate  explanations  shall  include  an  explanation  of  the  information  and  terms 
included  in  the  pre-contractual  information  to  be  provided  in  accordance  with  Articles  9 
and 10  and  of  the  consequences  that  concluding  the  credit  agreement  may  have  for  the 
consumer, including in the event of default in payment by the consumer. 

Chapter 4 
Annual percentage rate of charge 

Article 12 
Calculation of the annual percentage rate of charge 

The  annual  percentage  rate  of  charge,  equating,  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, shall be calculated in accordance with the 
mathematical formula set out in Annex I. 

For the purpose of calculating the annual percentage rate of charge, the total cost of 
the credit to the consumer shall be determined excluding any charges payable by the 
consumer for non-compliance with any of his commitments laid down in the credit 
agreement. 

Where the opening of an account is obligatory in order to obtain the credit, the costs 
of  maintaining  such  an  account,  the  costs  of  using  a  means  of  payment  for  both 
payment  transactions  and  drawdowns  on  that  account,  and  other  costs  relating  to 
payment  transactions  shall  be  included  in  the  total  cost  of  credit  to  the  consumer, 
unless the costs have been clearly and separately shown in the credit agreement or in 
any other agreement concluded with the consumer. 

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

In  the  case  of  credit  agreements  containing  clauses  allowing  variations  in  the 
borrowing  rate  and,  where  applicable,  in  the  charges  contained  in  the  annual 

1. 

2. 

3. 

4. 

EN 

33 

   EN 

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  be  calculated  at  the  level  set  at  the  signature  of  the 
contract. 

5. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the conditions of Articles 27 and 28, to amend the formula and the assumptions used 
to calculate the annual percentage rate of charge as set out in Annex I. 

The Commission shall, when adopting such delegated acts, amend, where necessary, 
the formula or assumptions laid down in Annex I, in particular if the assumptions set 
out in this Article and in Annex I do not suffice to calculate the annual percentage 
rate of charge in a uniform manner or are not adapted any more to the commercial 
situation at the market. 

1. 

2. 

1. 

Article 13 
Information concerning the borrowing rate 

Member States shall ensure that the creditor informs the consumer of any change in 
the  borrowing  rate,  on  paper  or  another  durable  medium,  before  the  change  enters 
into force. The information shall state the amount of the repayments to be made after 
the  entry  into  force  of  the  new  borrowing  rate  and,  in  cases  where  the  number  or 
frequency of the payments changes, particulars thereof. 

However, the parties may agree in the credit agreement that the information referred 
to  in  paragraph  1  is  to  be  given  to  the  consumer  periodically  in  cases  where  the 
change in the borrowing rate correlates directly with a change in a reference rate, the 
new  reference  rate  is  made  publicly  available  by  appropriate  means  and  the 
information concerning the new reference rate is also kept available in the premises 
of the creditor. 

Chapter 5 
Creditworthiness assessment 

Article 14 
Obligation to assess the creditworthiness of the consumer 

Member States  shall  ensure  that,  before  the  conclusion  of  the  credit  agreement, 
a thorough  assessment  of  the  consumer’s  creditworthiness  is  conducted  by  the 
creditor, based on criteria including the consumer’s income, savings, debts and other 
financial  commitments.  That  assessment  shall  be  carried  out  on  the  basis  of  the 
necessary  information,  obtained  by  the  creditor  or,  where  applicable,  credit 
intermediary  from  the  consumer  and  from  relevant  internal  or  external  sources  and 
shall respect the requirements with regard to necessity and proportionality set out in 
Article 6 of Directive 95/46/EC. Member States shall ensure that creditors establish 
appropriate  processes  to  assess  the  creditworthiness  of  the  consumer.  These 
processes  shall  be  reviewed  at  regular  intervals  and  up-to-date  records  of  those 
processes shall be maintained. 

EN 

34 

   EN 

2. 

Member States shall ensure the following: 

(a)  Where the assessment of the consumer’s creditworthiness results in a negative 
prospect  for  his  ability  to  repay  the  credit  over  the  lifetime  of  the  credit 
agreement, the creditor refuses credit. 

(b)  Where  the  credit  application  is  rejected,  the  creditor  informs  the  consumer 

immediately and without charge of the reasons for rejection. 

(c) 

In accordance with Article 10 of Directive 95/46/EC, the creditor informs the 
consumer in advance that a database is to be consulted. 

(d)  Where the  credit application is rejected on the  basis  of  the  data contained, or 
lack  thereof,  in  a  database  that  has  been  consulted,  the  creditor  informs  the 
consumer immediately and without charge of the name of the database that was 
consulted  as  well  as  of  its  controller  and  of  his  right  to  access  and,  where 
necessary, his right to rectify his data in that database. 

(e)  Without prejudice to the general right of access contained in Article 12 of the 
Directive  95/46/EC,  where  the  application  is  rejected  on  the  basis  of 
an automated decision or a decision based on methods such as automated credit 
scoring, the creditor informs the consumer immediately and without charge and 
that  the  creditor  explains  the  logic  involved  in  the  automated  decision  to  the 
consumer. 

(f)  The  consumer  has  the  opportunity  to  request  for  the  decision  to  be  reviewed 

manually. 

Member States  shall  ensure  that,  where  the  parties  consider  increases  in  the  total 
amount  of  credit  extended  to  the  consumer  after  the  conclusion  of  the  credit 
agreement,  the  financial  information  at  the  disposal  of  the  creditor  concerning  the 
consumer  is  updated  and  the  consumer’s  creditworthiness  re-assessed  before  any 
significant increase in the total amount of credit is granted. 

Further to assessing a consumer’s creditworthiness, Member States shall ensure that 
creditors  and  credit  intermediaries  obtain  the  necessary  information  regarding  the 
consumer’s  personal  and  financial  situation,  his  preferences  and  objectives  and 
consider a sufficiently large number of credit agreements from their product range in 
order to identify products that are not unsuitable for the consumer given his needs, 
financial situation and personal circumstances. Such considerations shall be based on 
information that is up to date at that moment in time and on reasonable assumptions 
as to the consumer’s situation over the term of the proposed credit agreement. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the  conditions  of  Articles  27  and  28,  to  specify  and  amend  the  criteria  to  be 
considered  in  the  conduct  of  a  creditworthiness  assessment  as  laid  down  in 
paragraph 1 of this Article and in ensuring that credit products are not unsuitable for 
the consumer as laid down in paragraph 4 of this Article. 

3. 

4. 

5. 

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35 

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1. 

2. 

3. 

1. 

2. 

Article 15 
Disclosure obligation on the part of the consumer 

Member States shall ensure that consumers provide creditors and, where applicable, 
credit  intermediaries  with  complete  and  correct  information  on  their  financial 
situation and personal circumstances in the context of the credit application process. 
That  information  should  be  supported,  when  necessary,  by  documentary  evidence 
from independently verifiable sources. 

As regards the information to be provided by the consumer in order for the creditor 
to be able to conduct a thorough assessment of the consumer’s creditworthiness and 
make  a  decision  on  whether  or  not  to  grant  the  credit,  Member  States  shall  ensure 
that creditors, at the pre-contractual phase, clearly specify the information, including 
independently  verifiable  evidence  where  necessary,  that  the  consumer  needs  to 
provide.  Member  States  shall  also  ensure  that  creditors  state  the  exact  timing  by 
which consumers are required to provide such information. 

Member States shall ensure that in cases where the consumer chooses not to provide 
the information  necessary  for an assessment of  his  creditworthiness,  the  creditor  or 
credit  intermediary  warns  the  consumer  that  they  are  unable  to  carry  out 
a creditworthiness assessment and therefore that the credit may not be granted. This 
warning may be provided in a standardised format. 

This  Article  shall  be  without  prejudice  to  the  application  of  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 data, in particular Article 6 thereof. 

Chapter 6 
Database access 

Article 16 
Database access 

Each  Member  State  shall  ensure  non-discriminatory  access  for  all  creditors  to 
databases used in that Member State for assessing the creditworthiness of consumers 
and for monitoring consumers’ compliance with the credit obligations over the life of 
the credit agreement. Such databases comprise databases  operated by private  credit 
bureaux or credit reference agencies and public credit registers. 

Powers are delegated to the Commission in accordance with Article 26 and subject to 
the conditions of Articles 27 and 28, to define uniform credit registration criteria and 
data processing conditions to be applied to the databases referred to in paragraph 1 of 
this Article. 

In particular, such delegated acts shall define the registration thresholds to be applied 
to such databases and shall provide for agreed definitions for key terms used by such 
databases. 

EN 

36 

   EN 

3. 

4. 

1. 

2. 

The  information  in  the  databases  shall  be  provided  unless  the  provision  of  such 
information  is  prohibited  by  other  Union  legislation  or  is  contrary  to  objectives  of 
public policy or public security. 

This  Article  shall  be  without  prejudice  to  the  application  of  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 data. 

Chapter 7 
Advice 

Article 17 
Advice standards 

For  the  purposes  of  this  Directive,  'advice'  constitutes  a  separate  service  from  the 
granting  of  a  credit.  Such  a  service  can  only  be  marketed  as  advice  when  the 
remuneration of the individual providing the service is transparent to the consumer. 

Member  States  shall  ensure  that  the  creditor  or  credit  intermediary  informs  the 
consumer, in the context of a given transaction, whether or not advice is being or will 
be  provided.  This  may  be  done  through  additional  pre-contractual  information. 
Where  advice  is  provided  to  consumers,  in  addition  to  the  requirements  set  out  in 
Articles 5 and 6, Member States shall ensure that creditors and credit intermediaries: 

(a) 

consider  a  sufficiently  large  number  of  credit  agreements  available  on  the 
market  so  as  to  enable  the  recommendation  of  the  most  suitable  credit 
agreements  for  the  consumer’s  needs,  financial  situation  and  personal 
circumstances; 

(b)  obtain  the  necessary  information  regarding  the  consumer’s  personal  and 
financial  situation,  his  preferences  and  objectives  so  as  to  enable  the 
recommendation  of  suitable  credit  agreements.  Such  an  assessment  shall  be 
based  on  information  that  is  up  to  date  at  that  moment  in  time  and  on 
reasonable  assumptions  as  to  the  consumer’s  situation  over  the  term  of  the 
proposed credit agreement. 

Chapter 8 
Early repayment 

Article 18 
Early repayment 

1. 

Member States shall ensure that the consumer has a statutory or contractual right to 
discharge  his  obligations  under  a  credit  agreement  prior  to  the  expiry  of  that 
agreement.  In such cases, he  shall be entitled to a reduction in the total cost of the 

EN 

37 

   EN 

2. 

1. 

2. 

3. 

4 

credit,  such  a  reduction  consisting  of  the  interest  and  the  costs  for  the  remaining 
duration of the contract. 

Member States may provide that the exercise of the right referred to in paragraph 1 is 
subject  to  certain  conditions.  Such  conditions  may  include  time  limitations  on  the 
exercise of the right, different treatment depending on the type of the borrowing rate, 
or  restrictions  with  regard  to  the  circumstances  under  which  the  right  may  be 
exercised. Member States may also provide that the creditor should be entitled to fair 
and  objectively  justified  compensation  for  potential  costs  directly  linked  to  early 
repayment of the credit. In any event, if the early repayment falls within a period for 
which the borrowing rate is fixed, exercise of the right may be made subject to the 
existence of a special interest on the part of the consumer. 

Where a Member State lays down such conditions, these shall not make the exercise 
of  the  right  referred  to  in  paragraph  1  excessively  difficult  or  onerous  for  the 
consumer. 

Chapter 9 
Prudential and supervisory requirements 

Article 19 
Authorisation and supervision of credit intermediaries 

Credit  intermediaries  shall  be  duly  authorised  to  carry  out  the  activities  set  out  in 
Article 3(e) by a competent authority as defined in Article 4 in their home Member 
State. Such authorisation shall be granted on the basis of requirements established in 
the home Member State of the credit intermediary and shall include the fulfilment of 
the professional requirements laid down in Article 20. 

Home Member States shall ensure that authorised credit intermediaries comply with 
the conditions for initial authorisation on a continuing basis. 

Home  Member States  shall  ensure  that  the  authorisation  of  credit  intermediaries  is 
withdrawn where either: 

(a) 

(b) 

the  credit  intermediary  no  longer  fulfils  the  requirements  under  which 
authorisation was granted; 

the credit intermediary has obtained the authorisation through false statements 
or any other irregular means. 

Member States  shall  ensure  that  authorised  credit  intermediaries  are  subject  to 
supervision of their ongoing activities by their home competent authority as referred 
to in Article 4. 

EN 

38 

   EN 

Article 20 
Registration of credit intermediaries 

1. 

2. 

3. 

4. 

Member  States  shall  ensure  that  a  register  of  authorised  credit  intermediaries  is 
established and kept up to date. 

Member  States  shall  ensure  that  all  authorised  credit  intermediaries,  whether 
established as natural or legal persons, are registered with a competent authority as 
referred to in Article 4, in their home Member State. 

As  regards  legal  persons,  the  register  referred  to  in  paragraph  1  shall  specify  the 
names  of  the  persons  within  the  management  who  are  responsible  for  the 
intermediation  business.  Member  States  may  also  require  the  registration  of  all 
natural persons who fulfil a client-facing function in an undertaking that pursues the 
activity of credit intermediation. 

The  register  shall  indicate  the  Member State(s)  where  the  intermediary  intends  to 
conduct business under the rules on the freedom of establishment or on the freedom 
to  provide  services  and  has  informed  its  home  Member State  competent  authority 
thereof. 

Member States  shall  ensure 
that  credit 
authorisation withdrawn are deleted from the register without undue delay. 

intermediaries  who  have  had 

their 

Member States  shall  ensure  that  a  single  information  point  is  established  to  allow 
quick and easy public access to information from the national register, which shall be 
compiled  electronically  and  kept  constantly  updated.  This  information  point  shall 
also  provide  the  identification  details  of  the  competent  authorities  of  each 
Member State referred to in Article 4. 

Article 21 
Professional requirements applicable to credit intermediaries 

1. 

In  addition  to  the  requirements  set  out  in  Article 6,  the  following  provisions  shall 
apply to all credit intermediaries on a continuing basis: 

(a)  Credit intermediaries shall be of good repute. As a minimum, they shall have 
a clean  police  record  or  any  other  national  equivalent  in  relation  to  serious 
criminal  offences  linked  to  crimes  against  property  or  other  crimes  related  to 
financial activities and they shall not have previously been declared bankrupt, 
unless they have been rehabilitated in accordance with national law. 

(b)  Credit intermediaries shall hold professional indemnity insurance covering the 
territories  in  which  they  offer  services,  or  some  other  comparable  guarantee 
against liability arising from professional negligence, unless such insurance or 
comparable guarantee is already provided by a creditor or other undertaking on 
whose  behalf  the  credit  intermediary  is  acting  or  for  which  the  credit 
intermediary  is  empowered  to  act  or  such  undertaking  has  taken  on  full 
responsibility for the intermediary’s actions. 

EN 

39 

   EN 

2. 

3. 

1. 

2. 

3. 

Member  States  shall  ensure  that  the  criteria  established  in  order  for  credit 
intermediaries  or  creditors’  staff  to  meet  their  professional  requirements  are  made 
public. 

Powers  are  delegated  to  the  Commission  to  adopt  and,  where  necessary  amend, 
regulatory  technical  standards  to  stipulate  the  minimum  monetary  amount  of  the 
professional 
in 
paragraph 1(b). 

insurance  or  comparable  guarantee 

indemnity 

referred 

to 

The regulatory technical standards referred to in subparagraph 1 shall be adopted in 
accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 

EBA  shall  develop  draft  regulatory  technical  standards  to  stipulate  the  minimum 
monetary  amount  of  the  professional  indemnity  insurance  or  comparable  guarantee 
referred to in paragraph 1(b) for submission to the Commission [within 6 months of 
the  adoption  of  the  proposal].  EBA  will  review,  and  if  necessary,  develop  draft 
regulatory  technical  standards  to  amend  the  minimum  monetary  amount  of  the 
professional 
in 
paragraph 1(b)  for  submission  to  the  Commission  for  the  first  time  [4  years  after 
entry into force of the Directive] and biannually thereafter. 

insurance  or  comparable  guarantee 

indemnity 

referred 

to 

Article 22 
Freedom of establishment for credit intermediaries and 
freedom to provide credit intermediation services in other Member States 

The  authorisation  of  credit  intermediaries  by  their  home  Member  State  shall  be 
effective  for  the  entire  territory  of  the  Union  without  a  requirement  for  further 
authorisation by the competent authorities of the host Member State(s). 

Any  credit  intermediary  intending  to  carry  on  business  for  the  first  time  in  one  or 
more  Member  States  under  the  freedom  to  provide  services  or  the  freedom  of 
establishment shall inform the competent authorities of its home Member State. 

Within a period of one month after being informed, those competent authorities shall 
notify  the  competent  authorities  of  the  host  Member  State(s)  concerned  of  the 
intention  of  the  credit  intermediary  and  shall  at  the  same  time  inform  the  credit 
intermediary concerned of that notification. 

The credit intermediary may start business one month after the date on which he was 
informed by the competent authorities of the home Member State of the notification 
referred to in the second subparagraph. 

In cases where the authorisation of credit intermediaries is withdrawn by the  home 
Member State that home Member State shall notify the host Member State(s) of such 
withdrawal as soon as possible and at the latest within one month, by any appropriate 
means. 

Competent  authorities  of  different  Member  States  shall  cooperate  with  each  other 
whenever necessary for the purpose of carrying out their duties under this Directive, 
making  use  of  their  powers  whether  set  out  in  this  Directive  or  in  national  law. 
Competent  authorities  shall  render  assistance  to  competent  authorities  of  the  other 

EN 

40 

   EN 

Member States. In particular, they shall exchange information and cooperate in any 
investigation or supervisory activities. 

The  competent  authorities  may  refer  situations  to  the  EBA  where  a  request  for 
cooperation, in particular to exchange information, has been rejected or has not been 
acted  upon  within  a  reasonable  time,  and  request  its  assistance  in  accordance  with 
Article  19  of  Regulation  (EU)  No  1093/2010.  In  such  cases,  the  EBA  may  act  in 
accordance with the powers conferred on it by that Article. 

4. 

Where  the  host  Member  State  has  clear  and  demonstrable  grounds  for  concluding 
that  a  credit  intermediary  acting  within  its  territory  under  the  freedom  to  provide 
services or through a branch is in breach of the obligations set out in this Directive, it 
shall  refer  those  findings  to  the  competent  authority  of  the  home  Member  State 
which shall take the appropriate measures. In cases where, despite measures taken by 
the competent authority of the home Member State, a credit intermediary persists in 
acting  in  a  manner  that  is  clearly  prejudicial  to  the  interests  of  host  Member  State 
consumers or the orderly functioning of markets, the following shall apply: 

(a)  The  competent  authority  of  the  host  Member  State,  after  informing  the 
competent  authority  of  the  home  Member  State  shall  take  all  the  appropriate 
measures  needed  in  order  to  protect  consumers  and  the  proper  functioning  of 
the  markets  including  by  preventing  the  offending  credit  intermediaries  from 
initiating any further transactions within their territories. The Commission shall 
be informed of such measures without undue delay. 

(b) 

In  addition,  the  competent  authority  of  the  host  Member  State  may  refer  the 
matter to the EBA and request its assistance in accordance with Article 19 of 
Regulation (EU) No 1093/2010. In that case, the EBA may act in accordance 
with the powers conferred on it by that Article. 

Article 23 
Authorisation, registration and supervision of non-credit institutions 

Member States shall ensure that non-credit institutions as referred to in Article 3(i) are subject 
to adequate authorisation, registration and supervision arrangements by a competent authority 
as defined in Article 4. 

Chapter 10 
Final provisions 

Article 24 
Penalties 

1. 

Without prejudice to procedures for the withdrawal of authorisation or to the right of 
Member States  to  impose  criminal  sanctions,  Member States  shall  ensure,  in 
conformity with their national law, that appropriate administrative measures can be 
taken  or  administrative  sanctions  imposed  against  persons  responsible  where  the 
provisions  adopted in the implementation of this Directive have not been complied 

EN 

41 

   EN 

with. Member States shall ensure that these measures are effective, proportionate and 
dissuasive. 

Member  States  shall  provide  for  penalties  in  particular  cases  where  consumers 
knowingly provide incomplete or incorrect information in order to obtain a positive 
creditworthiness assessment where the complete and correct information would have 
resulted  in  a  negative  creditworthiness  assessment,  and  are  subsequently  unable  to 
fulfil the conditions of the agreement, and shall take all measures necessary to ensure 
that they are implemented. 

Member States shall ensure that the competent authority discloses to the public any 
measure or sanction that will be imposed for infringement of the provisions adopted 
in  the  implementation  of  this  Directive,  unless  such  disclosure  would  seriously 
jeopardise  the  financial  markets  or  cause  disproportionate  damage  to  the  parties 
involved. 

Article 25 
Dispute resolution mechanisms 

Member  States  shall  ensure  that  appropriate  and  effective  complaints  and  redress 
procedures  are  established  for  the  out-of-court  settlement  of  disputes  concerning 
rights  and  obligations  established  under  this  Directive  between  creditors  and 
consumers  and  between  credit  intermediaries  and  consumers,  using  existing  bodies 
where  appropriate.  Member  States  shall  further  ensure  that  all  creditors  and  credit 
intermediaries adhere to one or more such bodies implementing such complaint and 
redress procedures. 

Member States shall ensure that these bodies actively cooperate in the resolution of 
cross-border disputes. 

Article 26 
Exercise of the delegation 

The  powers  to  adopt  delegated  acts  referred  to  in  Articles  6(4),  8(4),  9(3),  10(3), 
14(5) and 16(2) shall be conferred on the Commission for an indeterminate period of 
time following the entry into force of this Directive. 

As soon as it adopts a delegated act, the Commission shall notify it simultaneously to 
the European Parliament and to the Council. 

The  power  to  adopt  delegated  acts  is  conferred  on  the  Commission  subject  to  the 
conditions laid down in Articles 27 and 28. 

Article 27 
Revocation of the delegation 

The  delegation  of  powers  referred  to  in  Articles  6(4),  8(4),  9(3),  10(3),  14(5)  and 
16(2) may be revoked at any time by the European Parliament or by the Council. 

2. 

1. 

2. 

1. 

2. 

3. 

1. 

EN 

42 

   EN 

2. 

3. 

1. 

2. 

3. 

1. 

2. 

3. 

The institution which has commenced an internal procedure for deciding whether to 
revoke the delegation of powers shall inform the other legislator and the Commission 
at the latest one month before the final decision is taken, stating the delegated powers 
which could be subject to revocation and the reasons for any revocation. 

The decision of revocation shall terminate the delegation of the powers specified in 
that  decision.  It  shall  take  effect  immediately  or  at  a  later  date  specified  therein.  It 
shall  not  affect  the  validity  of  the  delegated  acts  already  in  force.  It  shall  be 
published in the Official Journal of the European Union. 

Article 28 
Objections to delegated acts 

The  European  Parliament  and  the  Council  may  object  to  a  delegated  act  within 
a period of two months from the date of notification. At the initiative of the European 
Parliament or the Council that period shall be extended by one month. 

Where,  on  expiry  of  the  period  referred  to  in  paragraph  1,  neither  the  European 
Parliament nor the Council has objected to the delegated act, it shall be published in 
the  Official  Journal  of  the  European  Union  and  shall  enter  into  force  on  the  date 
stated  therein.  The  delegated  act  may  be  published  in  the  Official  Journal  of  the 
European  Union  and  enter  into  force  before  the  expiry  of  that  period  where  the 
European  Parliament  and  the  Council  have  both  informed  the  Commission  of  their 
intention not to raise objections. 

Where either the European Parliament or the Council objects to an adopted delegated 
act  within  the  period  referred  to  in  paragraph  1,  it  shall  not  enter  into  force.  The 
institution which objects shall state the reasons for objecting to the delegated act. 

Article 29 
Imperative nature of this Directive 

Member States  shall  ensure  that  consumers  may  not  waive  the  rights  conferred  on 
them  by  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 Directive cannot be circumvented as a result of the way in which agreements 
are formulated, in particular by integrating credit agreements falling within the scope 
of  this  Directive  into  credit  agreements  the  character  or  purpose  of  which  would 
make it possible to avoid its application. 

Member  States  shall  take  the  necessary  measures  to  ensure  that  consumers  do  not 
lose  the  protection  granted  by  this  Directive  by  virtue  of  the  choice  of  the  law  of 
a third country as the law applicable to the credit agreement. 

EN 

43 

   EN 

Article 30 
Transposition 

1. 

Member States  shall  adopt  and  publish,  by  [2  years  after  entry  into  force]  at  the 
latest, the laws, regulations and administrative provisions necessary to comply with 
this Directive. They shall 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 [2 years after entry into force]. 

When  Member States  adopt  those  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. 

2. 

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. 

Article 31 
Review clause 

The  Commission  shall  undertake  a  review  five  years  after  the  entry  into  force  of  this 
Directive.  The  review  shall  consider  the  effectiveness  and  appropriateness  of  the  provisions 
on consumers and the internal market. 

The review shall include the following: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

an assessment of consumer satisfaction with the ESIS; 

other pre-contractual disclosures; 

an analysis of cross-border business by credit intermediaries and creditors; 

an analysis of the evolution of the market for non-credit institutions providing credit 
agreements relating to residential immovable property; 

an assessment on the need for further measures, including a passport for non-credit 
institutions providing credit agreements relating to residential immovable property; 

an examination of the necessity to introduce rights and obligations with regard to the 
post-contractual stage of credit agreements 

(g) 

an assessment of the need to extend its scope to small companies. 

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

Article 32 

EN 

44 

   EN 

Article 33 

This Directive is addressed to the Member States in accordance with the Treaties. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

EN 

45 

   EN 

Annex I 
Calculation of the annual percentage rate of charge 

I. 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 (APRC), 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
∑
1
k
=
where: 

∑

) l

D
l

(
1

(
1

C

X

X

+

=

+

)

1
=

m

−

−

k

s

l

t

k

'

– 

– 

– 

– 

– 

– 

– 

– 

– 

X is the APRC 

m is the number of the last drawdown 

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

Ck is the amount of drawdown k 

tk 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, thus t1 = 0 

m' is the number of the last repayment or payment of charges 

l is the number of a repayment or payment of charges 

Dl is the amount of a repayment or payment of charges 

sl 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) 

(e) 

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. 

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.: 

EN 

46 

   EN 

 
 
 
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. 

II. Additional assumptions for the calculation of the annual percentage rate of charge 

(a) 

(b) 

(c) 

If a credit agreement gives the consumer freedom of drawdown, the total amount of 
credit shall be deemed to be drawn down immediately and in full. 

If a credit agreement provides different ways of drawdown with different charges or 
borrowing rates, the total amount of credit shall be deemed to be drawn down at the 
highest  charge  and  borrowing  rate  applied  to  the  most  common  drawdown 
mechanism for this type of credit agreement. 

If  a  credit  agreement  gives  the  consumer  freedom  of  drawdown  in  general  but 
imposes,  among  the  different  ways  of  drawdown,  a  limitation  with  regard  to  the 
amount and period of time, the amount of credit shall be deemed to be drawn down 
on  the  earliest  date  provided  for  in  the  agreement  and  in  accordance  with  those 
drawdown limits. 

(d) 

If there is no fixed timetable for repayment, it shall be assumed: 

(i) 

that the credit is provided for a period of twenty years, and 

(e) 

(f) 

(g) 

(h) 

(i) 

(j) 

(ii) 

that the credit will be repaid in 240 equal instalments and at monthly intervals. 

If  there  is  a  fixed  timetable  for  repayment  but  the  amount  of  such  repayments  is 
flexible, the amount of each repayment shall be deemed to be the lowest for which 
the agreement provides. 

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. 

If the ceiling applicable to the credit has not yet been agreed, that ceiling is assumed 
to be EUR 180 000. 

In the case of a bridging loan the total amount of credit shall be deemed to be drawn 
down in full and for the whole duration of the credit agreement. If the duration of the 
credit  agreement  is  not  known  the  annual  percentage  rate  of  charge  shall  be 
calculated on the assumption that the duration of the credit is three months. 

If different interest rates and charges are offered for a limited period or amount, the 
interest rate and the charges shall be deemed to be the highest for the whole duration 
of the credit agreement. 

For  credit  agreements  for  which  a  fixed  borrowing  rate  is  agreed  in  relation  to  the 
initial  period,  at  the  end  of  which  a  new  borrowing  rate  is  determined  and 
subsequently  periodically  adjusted  according  to  an  agreed  indicator,  the  calculation 
of the annual percentage rate shall be based on the assumption that, at the end of the 
fixed  borrowing  rate  period,  the  borrowing  rate  is  the  same  as  at  the  time  of 

EN 

47 

   EN 

calculating the annual percentage rate, based on the value of the agreed indicator at 
that time. 

EN 

48 

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Annex II 
European Standardised Information Sheet (ESIS) 

PART A 

The  text  in  this  model  shall  be  reproduced  as such  in  the  ESIS.  Indications  between  square 
brackets  shall  be  replaced  with  the  corresponding  information.  Instructions  on  how  to 
complete the ESIS are provided in Part B. 

Wherever 'where applicable' is indicated, the creditor shall fill in the box if the information is 
relevant  to  the  credit  agreement.  Where  the  information  is  not  relevant,  the  creditor  shall 
delete the information in question or the entire section. In the latter case, the numbering of the 
ESIS sections shall be adjusted accordingly. 

The below information shall be provided in a single document. The font used shall be clearly 
readable. Bold font, shading or larger font sizes shall be used for the information elements to 
be highlighted. 

(Introductory text) 

ESIS Model 

This document was produced on [current date] in reply to your request for information. This document 
does not constitute an obligation for us to grant you a loan. 

This document was produced on the basis of the information that you have provided so far and on the 
current financial market conditions. The information below remains valid until [validity date]. After that 
date, it may change in line with market conditions. 

1. Lender 

[Name] 

[Geographical address] 

[Telephone number] 

[E-mail address] 

[Web address] 

Supervisory authority: [Name and Web address of supervisory authority] 

Contact person: [Full contact details of contact person] 

2. Main features of the loan 

Amount and currency of the loan granted: [value][currency] 

(Where applicable) "This loan is not in [national currency]" 

Duration of the loan: [duration] 

[Type of loan]  

[Type of applicable interest rate] 

Total amount to be reimbursed: 

[Maximum available loan amount relative to the value of the property]: 

(Where applicable) [Security] 

3. Interest rate 

EN 

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   EN 

The APRC is the total cost of the loan expressed as an annual percentage. The APRC is provided to 
help you to compare different offers. The APRC applicable to your loan is [APRC]. It comprises: 

Interest rate [value in percentage] 

[Other components of the APRC] 

4. Frequency and number of payments 

Repayment frequency: [frequency] 

Number of payments: [number] 

5. Amount of each instalment 

[Amount] [currency] 

(Where applicable) The exchange rate used for converting your repayment in [credit currency] to 
[national currency] will be the rate published by [name of institution publishing exchange rate] on 
[date]. 

6. Illustrative repayment table 

This table shows the amount to be paid every [frequency]. 

The instalments (column [relevant no.]) are the sum of interest paid (column [relevant no.]), capital 
paid (column [relevant no.]) and, where applicable other costs (column [relevant no.]). Where 
applicable, The costs in the other costs column relate to [list of costs]. Outstanding capital (column 
[relevant no.]) is the amount of the loan that remains to be reimbursed after each instalment. 

[Amount and currency of the loan] 

[Duration of the loan] 

[Interest rate] 

[Table] 

(Where applicable) [Warning on the variability of the instalments] 

7. Additional obligations and costs 

The borrower must comply with the following obligations in order to benefit from the lending conditions 
described in this document. 

[Obligations] 

(Where applicable) Please note that the lending conditions described in this document (including the 
interest rate) may change if these obligations are not complied with. 

In addition to the costs already included in the [frequency] instalments, this loan entails the following 
costs: 

Costs to be paid on a one-off basis 

Costs to be paid regularly 

Please make sure that you are aware of all other taxes and costs (e.g. notary fees) associated with 
this loan. 

8. Early repayment  

(Where applicable) You do not have the possibility to repay this loan early. 

(Where applicable) You have the possibility to repay this loan early, either fully or partially. 

(Where applicable) [Conditions] 

[Procedure] 

(Where applicable) Exit charge: 

(Where applicable) Should you decide to repay this loan early, please contact us to ascertain the exact 
level of the exit charge at that moment. 

EN 

50 

   EN 

(Where applicable) 9. Right of withdrawal 

For a period of [length of withdrawal period] after the signing of the credit agreement, the borrower 
may exercise his right to cancel the agreement. 

10. Internal complaint scheme 

[Name of the relevant department] 

[Geographical address] 

[Telephone number] 

[E-mail address] 

Contact person: [contact details] 

11. External complaint body 

In the event of disagreement with the lender which remains unresolved the borrower has the possibility 
to address a complaint to: 

[Name of the complaint body] 

[Geographical address] 

[Telephone number] 

[E-mail address] 

12. Non-compliance with the commitments linked to the loan: consequences for the borrower 

[Types of non-compliance] 

[Financial and/or legal consequences] 

Should you encounter difficulties in making your [frequency] payments, we invite you to contact us as 
quickly as possible to explore possible solutions. 

(Where applicable) 13. Additional information in the case of distance marketing 

(Where applicable) The law taken by the creditor as a basis for the establishment of relations with you 
before the conclusion of the credit contract is [applicable law]. 

Information and contractual terms will be supplied in [language]. With your consent, we intend to 
communicate in [language/s] during the duration of the credit agreement. 

14. Risks and warnings 

•  We draw your attention to the risks involved in taking out a mortgage loan. 

•  (Where applicable) The interest rate of this loan does not remain fixed during the whole duration of 

the loan. 

•  (Where applicable) This loan is not in [national currency]. Please note that the amount in [national 

currency] that you will need to pay at each instalment will vary in line with the [loan’s 
currency/national currency] exchange rate. 

•  (Where applicable)This is an interest-only loan. This means that, during its duration, you will need to 

build up enough capital in order to reimburse the loan amount at maturity. 

•  You will also need to pay other taxes and costs (where applicable), e.g. notary fees. 

•  Your income may change. Please make sure that if your income falls you will still be able to afford 

your [frequency] repayment instalments. 

•  (Where applicable) Your home may be repossessed if you do not keep up with payments. 

EN 

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   EN 

PART B 

Instructions to complete the ESIS 

In completing the ESIS, the following instructions shall be followed: 

Section 'Introductory text' 

(1) 

The validity date shall be properly highlighted. 

Section '1. Lender' 

(1) 

(2) 

(3) 

(4) 

(1) 

(2) 

Name, telephone number, geographical address and web address of the creditor shall 
refer  to  the  creditor’s  headquarters.  The  relevant  authority  for  the  supervision  of 
lending activities shall be indicated. 

Information on the contact person is optional. 

In line with Article 3 of Directive 2002/65/EC, where the transaction is being offered 
at a distance, the creditor shall indicate, where applicable, the name and geographical 
address  of  its  representative  in  the  Member  State  of  residence  of  the  borrower. 
Indication  of  the  telephone  number,  e-mail  address  and  web  address  of  the 
representative of the credit provider is optional. 

In line with Article 3 of Directive 2002/65/EC, where the transaction is being offered 
at  a  distance,  the  creditor  shall  indicate  the  name  of  the  trade  register  in  which  the 
creditor  is  entered  and  its  registration  number  or  an  equivalent  means  of 
identification in that register. 

Section '2. Main features of the loan' 

The  duration  of  the  credit  shall  be  indicated  in  years  or  months,  whichever  is  the 
most  relevant.  Where  the  duration  of  the  credit  can  vary  during  the  life  of  the 
contract, the creditor shall explain when and under which conditions this can occur. 

The  description  of  the  type  of  credit  shall  clearly  indicate  how  the  capital  and  the 
interest shall be reimbursed during the life of the credit (i.e. constant, progressive or 
regressive reimbursements). 

This  section  shall  also  explain  whether  the  interest  rate  is  fixed  or  variable  and, 
where  applicable,  the  periods  during  which  it  will  remain  fixed;  the  frequency  of 
subsequent revisions and the existence of limits to the interest rate variability, such 
as caps or floors. The formula used to revise the interest rate shall be explained. The 
creditor shall also indicate where further information on the indices or rates used in 
the  formula  can  be  found.  Where  the  credit  currency  is  different  from  the  national 
currency, the creditor shall include information on the formula used to calculate the 
exchange rate spreads and the frequency of their adjustment. 

(3) 

'Total amount to be reimbursed' shall be calculated as the sum of the credit amount 
and the total cost of the credit. 

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(4) 

(5) 

(1) 

(1) 

(1) 

(2) 

(3) 

(4) 

(1) 

(2) 

'Maximum available loan amount relative to the value of the property' shall indicate 
the  loan-to-value  ratio.  This  ratio  is  to  be  accompanied  by  an  example  in  absolute 
terms of the maximum amount that can be borrowed for a given property value. 

Where the credit will be secured by a mortgage on the property or another commonly 
used guarantee, the creditor shall draw the borrower’s attention to this. 

Section '3. Interest rate' 

In  addition  to  the  interest  rate,  all  the  other  costs  contained  in  the  APRC  shall  be 
listed (name and equivalence in percentage). Where providing a percentage rate for 
each of those costs is not possible or does not make sense, the creditor shall provide 
a global percentage rate. 

Section '4. Frequency and number of payments' 

Where payments are to be done on a regular basis, the frequency of payments shall 
be indicated (e.g. monthly). Where the frequency of payments will be irregular, this 
shall be clearly explained to the borrower. The number of payments indicated shall 
cover the whole duration of the credit. 

Section '5. Amount of each instalment' 

The loan currency shall be clearly indicated. 

Where  the  amount  of  the  instalments  may  change  during  the  life  of  the  credit,  the 
creditor  shall  specify  the  period  during  which  that  initial  instalment  amount  will 
remain valid and when and how frequently afterwards it will change. 

Where  the  credit  currency  is  different  to  the  borrower’s  national  currency,  the 
creditor  shall  include  numerical  examples  clearly  showing  how  changes  to  the 
relevant  exchange  rate  may  affect  the  amount  of  the  instalments.  The  illustrated 
exchange rate changes need to be realistic, symmetrical and include at least the same 
number of unfavourable cases as favourable cases. 

Where the currency used for the payment of instalments is different from the credit 
currency,  the  exchange  rate  to  be  used  shall  be  clearly  indicated.  Such  indications 
shall include the name of the institution publishing the exchange and the moment at 
which the applicable exchange is calculated. 

Section '6. Illustrative repayment table' 

Where the interest may vary during the life of the credit, the creditor shall indicate, 
after the reference to the interest rate, the period during which that initial interest rate 
will remain valid. 

The  table  to  be  included  in  this  section  shall  contain  the  following  columns: 
'repayment  moment',  'amount  of  the  instalment',  'interest  to  be  paid  per  instalment', 
'other  costs  included  in  the  instalment'  (where  relevant),  'capital  repaid  per 
instalment' and 'outstanding capital after each instalment'. 

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(3) 

(4) 

(1) 

(2) 

(1) 

(2) 

For the first repayment year the information shall be given for each instalment and 
a subtotal shall be indicated for each of the columns at the end of that first year. For 
the following years, the detail can be provided on an annual basis. An overall total 
row shall be added at the end of the table and shall provide the total amounts for each 
column. The total amount paid by the borrower (i.e. the overall sum of the 'amount of 
the instalment' column) shall be clearly highlighted and presented as such. 

Where the interest rate is subject to revision and the amount of the instalment after 
each revision is unknown, the creditor may indicate in the repayment table the same 
instalment  amount  for  the  whole  credit  duration.  In  such  a  case,  the  creditor  shall 
draw that fact to the attention of the borrower by visually differentiating the amounts 
which are known from the hypothetical ones (e.g. using a different font, borders or 
shading).  In  addition,  a  clearly  legible  text  shall  explain  for  which  periods  the 
amounts represented in the table may vary and why. The creditor shall also include: 
(1) where relevant, the applicable caps and floors; (2) an example of how the amount 
of the instalment would vary where the interest rate increases or decreases by 1 % or 
by a higher percentage, where this is more  realistic  given  the  magnitude  of  normal 
changes to the interest rate and (3) where there is a cap, the instalment amount in the 
worst-case scenario. 

Section '7. Additional obligations and costs' 

The  creditor  shall  refer  in  this  section  to  obligations  such  as  the  need  to  insure  the 
property, to purchase life insurance or to buy any other product or service. For each 
obligation, the creditor shall specify towards whom and by when the obligation needs 
to be fulfilled. 

The creditor shall also list each of the costs by category, indicating their amount, to 
whom they are to be paid and at what moment. Where the amount is not known, the 
creditor  shall  provide  a  possible  range  or  an  indication  of  how  the  amount  will  be 
calculated. 

Section '8. Early repayment' 

Where  the  credit  may  be  repaid  early,  the  creditor  shall  indicate  under  what 
conditions, if any, the borrower can do so. The creditor shall also indicate the steps 
the borrower should take in order to request the early repayment. 

Where an exit charge will be applied to the early repayment, the creditor shall draw 
the borrower’s attention to this and indicate its amount. In cases where the amount of 
the exit charge would depend on different factors, such as the amount repaid or the 
prevailing  interest  rate  at  the  moment  of  the  early  repayment,  the  creditor  shall 
indicate  how  the  exit  charge  will  be  calculated.  The  creditor  shall  then  provide  at 
least  two  illustrative  examples  in  order  to  demonstrate  to  the  borrower  the  level  of 
the exit charge under different possible scenarios. 

Section '9. Right of withdrawal' 

(1) 

Where a right of withdrawal exists, the creditor shall specify the conditions to which 
this right is subject, the procedure that the borrower will need to follow in order to 
exercise  this  right,  inter  alia,  the  address  to  which  the  notification  of  withdrawal 
should be sent, and the corresponding fees (where applicable). 

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(2) 

(3) 

In line with Article 3 of Directive 2002/65/EC, where the transaction is being offered 
at a distance, the consumer shall be informed of the existence or absence of a right of 
withdrawal. 

In line with Article 5 of Directive 85/577/EEC, where the transaction is being offered 
away from business premises, the consumer shall be informed of the existence of a 
right of withdrawal. 

Section '10. Internal complaint scheme' 

(1) 

Information on the contact person is optional. 

Section '11. External complaint body' 

(1) 

(1) 

(2) 

In line with Article 3 of Directive 2002/65/EC, where the transaction is being offered 
at  a  distance,  the  creditor  shall  also  specify  whether  or  not  there  is  an  out-of-court 
complaint and redress mechanism for the borrower and, if so, explain the methods of 
access to it. 

Section '12. Non-compliance with the commitments linked to the credit: 
consequences for the borrower' 

Where non-observance of any of the borrower’s obligations linked to the credit may 
have financial or legal consequences for the borrower, the creditor shall describe in 
this section the different possible cases (e.g. late payments/default, failure to respect 
the obligations set out in Section 7 'Additional obligations and costs'). 

For  each  of  those  cases,  the  creditor  shall  specify,  in  clear,  easily  comprehensible 
terms,  the  penalties  or  consequences  to  which  they  may  give  rise.  Reference  to 
serious consequences should be highlighted. 

Section '13. Additional information in the case of distance marketing' 

(1) 

Where applicable, this section will include a clause stipulating the law applicable to 
the credit agreement and/or the competent court. 

(1) 

(2) 

Section '14. Risks and warnings' 

All the listed warnings shall be highlighted. 

Where  applicable,  the  creditor  shall  recapitulate  in  this  section  the  general  interest 
rate revision rules and provide a quantitative example of how the instalments would 
increase if the credit’s interest rate were to increase by X % (as explained in section 
'Illustrative repayment table') and/or in the worst-case scenario (if there is a cap on 
the interest rate variability). 

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