European associations of consumers and the European Credit Sector Associations (ECSAs)
Summary of the initiative
Name of Private Regulator:European associations of consumers and the European Credit Sector Associations (ECSAs)
Objective(s):A voluntary code of conduct on home loans was drawn up and negotiated by the European Credit Sector Associations (ECSAs) and the European consumer organisations, on the initiative of the Commission. (ECSAS= FBE, European Savings Banks Group, European Mortgage Federation, European Federation of Building Societies, EUROFINAS). The aim of the Code was to make it easier for consumers to compare loan products available from different lenders, including lenders from another Member State and so allow consumers to make an informed choice. Credit institutions subscribing to the Code are obliged to provide consumers with proper pre-contractual information concerning the terms of home loans. In particular: general information on home loans on offer; personalised information at a pre-contractual stage via a "European Standardised Information Sheet". The code of conduct has been replaced by the Mortgage Credit Directive (MCD). Its preamble states the following: "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 loans. The objective of the Code was to set out the general information that should be available to 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." The MCD incorporates the provisions of the Code of Conduct but goes further. The overall objective of the Directive is to improve consumer protection in the area of mortgage credit by enhancing responsible lending and borrowing practices. Creditors are obliged to inform consumers via a European standardised information sheet (ESIS) of all relevant features of the credit on offer at pre-contractual level, including inherent credit risks. The Directive covers credits secured by a mortgage and home loans granted to consumers. It mainly focuses on the pre-contractual stage (e.g. standardised information sheet, creditworthiness assessment, standards for advisory services) but also contains rules on conduct of business obligations, knowledge and competence for staff, early repayment, foreign currency and variable rate loans, tying practices, as well as high-level principles in various fields such as arrears, property valuation and financial education. In addition it provides for rules on admission and supervision of credit intermediaries and non-credit institutions. The MCD will only apply to credit agreements agreed upon after 21 March 2016.