Sometimes we do not have the necessary cash to buy goods we need and therefore we decide to make a credit agreement with the seller or bank.

If we decide to take a loan, we must remember that borrowing money from a trader is equivalent to buying a financial service and to ensure that we buy the best service we need to shop around and compare what different creditors are offering.

To be able to compare credit agreements, we need specific information before we make a commitment.

Therefore, before entering into a credit agreement, we should be provided, among others, with the following information:

• the type of credit we are about to buy;

• the identity and geographical address of the creditor;

• the total amount of credit to be provided and the conditions under which the credit is being given;

• the duration of the credit agreement;

• the borrowing rate, conditions governing the application of that rate and any other information related to the borrowing rate;

• the annual percentage rate of charge (APR) and total amount payable by us and any other information related to the APR;

• the amount, number and frequency of payments we will be making;

• where applicable, any other charges for maintaining one or several accounts recording both payment transactions and drawdowns;

• the interest rate applicable in case of late payments, arrangements for its adjustment and, where applicable, any charges payable for default;

• a warning relating to the consequences of missing payments;

• the existence or absence of a right of withdrawal from the credit agreement;

• the right of early repayment and, where applicable, the creditor’s right to compensation;

• the consumer’s right to be informed immediately and free result of a database consultation in respect of assessing credit worthiness; and

• the consumer’s right to be given a copy of the draft agreement free of charge.

The creditor must provide all this information on paper or through another medium and all information must be equally prominent.

Furthermore, the Consumer Credit regulations provide a specific form, known as the Standard European Consumer Credit Information, to be filled in by the creditor, ensuring that the pre-contractual information required by the law is actually provided to the consumer who is about to enter a credit agreement.

Once the credit agreement is concluded, we are entitled to a copy of the final agreement. The above mentioned information should be included in the final agreement.

The Consumer Credit regulations also impose specific conditions on adverts, promoting the purchase of credit. Credit advertising should indicate in an unambiguous manner, via an example, the credit’s interest rate and its total costs. This information should enable prospective borrowers to better compare different credit agreements.

The right of withdrawal

Upon entering a credit agreement, consumers must be clearly informed about their right to withdraw from it. The withdrawal period is 14 days and starts to apply from the date we sign the credit agreement, from when we receive in writing or through a durable medium the contractual terms and conditions and information in accordance with the Consumer Credit Regulations.

During the withdrawal period, we can change our mind and cancel the credit agreement. Should we decide to exercise this right, we have the obligation to inform the creditor in writing before the 14-day deadline expires. The right of withdrawal does not apply to credit agreements which, by law, are required to be concluded in the presence of a public notary.

The right of early repayment

The regulations also give us the right to repay the loan before its due date. If, however, we go for early repayment, we will be entitled to a proportional reduction of the total cost of credit and may be required to pay any fair and reasonable costs specified or established in the credit agreement. The regulations specify the maximum amount of compensation a creditor may charge consumers when the credit is paid before the agreed termination – unless the creditor proves that the loss suffered from early repayment exceeds the amount determined by law.

These regulations do not apply to credit agreements amounting to less than €200 or above €75,000.

odette.vella@mccaa.org.mt

Odette Vella is senior information officer, Office for Consumer Affairs, Malta Competition and Consumer Affairs Authority.