Consumer Credit Regulations provide consumers with specific rights whenever they need to borrow money from a creditor. This legislation also provides guidelines on what information should be included in adverts promoting credit.
Such advertising must, for instance, indicate in an unambiguous manner the credit’s interest rate and also its total costs. The advert should also feature a clear example that illustrates the nature and costs of the credit. This information should enable prospective borrowers to better compare different credit agreements.
Before signing a credit agreement consumers must be given all the information about the credit agreement they are about to enter into. Consumers must, for instance, be informed about the type of credit to be provided under the agreement – the identity and geographical address of the creditor, the amount of money that will be borrowed, the duration of the credit agreement, the borrowing rate, the annual percentage rate of charge (APR) and the total amount payable by the consumer, the number and frequency of payments, the interest rate applicable in the case of late payments and, where applicable, any charges payable for default.
This information should be provided in a simple and transparent way. The Regulations provide a standard format for this information, which is known as the Standard European Consumer Credit Information.
The Consumer Credit Regulations give consumers the right to withdraw from a credit agreement without the need to explain why.
The 14-day cooling off period starts from the date consumers sign the credit agreement or from the day they receive in writing or on a durable medium the contractual terms and conditions.
Consumers must be given all the information about the credit agreement they are about to enter into
When consumers opt to exercise their cancellation rights they have the responsibility to notify the creditor in writing before the 14-day deadline expires. When such decision is taken the consumer must repay the creditor, the credit provided and also pay the interest accrued on it.
This right of withdrawal does not apply to credit agreements which by law are required to be concluded before a public notary.
These regulations also stipulate that consumers may pay the loan in full or in part before its due date without incurring unreasonable penalties. While consumers may not be penalised for exercising this right, they may be required to pay any fair and reasonable costs as specified in the credit agreement.
To further protect consumers, the Consumer Credit Regulations specify the maximum amount of compensation the creditor may charge for early repayment, unless the creditor objects to this amount and proves that the loss suffered from early repayment exceeds the amount determined by law.
The credit agreements ex-cluded from the obligations of the Consumer Credit Regulations are those which amount to less than €200 or more than €75,000.
Odette Vella is senior information officer, Office for Consumer Affairs, Malta Competition and Consumer Affairs Authority.