The Malta Competition and Consumer Affairs Authority recently issued draft regulations to have in place a comprehensive regime to protect consumers seeking home loans. Regrettably, there seems to be minimal interest in what for me is a vital piece of legislation, which, at one time or another, impacts most of us. Though an important step forward, the proposals by the MCCAA raise various issues.
An important measure in the draft regulations concerns the minimum competence requirements of the staff of creditors and credit intermediaries. It is imperative that compliance with such minimum requirements is actively monitored by the MCCAA. This brings me to a point I consider to be fundamental if these regulations are going to be effective.
One glaring shortcoming following the making of the consumer credit regulations in 2005 is that no dedicated unit has been tasked with the role of ensuring compliance with those regulations. The need to have a dedicated unit now that the MCCAA is proposing these home loans regulations if anything becomes more pressing.
A home loan is a fairly complex area and necessitates the input of experts. In relation to consumer credit issues, consumers in practice do not have recourse to a properly resourced regulatory authority with specialised expertise on the subject. It is important for the benefit of consumers that with the imminent enactment of the home loan regulations this lacuna within the regulatory administrative set-up is seen to in short order.
The draft regulations envisage that protection should not extend to home loans given by employers to their employees. I fail to see why this should be the case. Giving one’s employees loans at more favourable rates does not justify the non-application of the protection afforded at law to other consumers.
Significantly, the draft regulations require creditors to assess the credit worthiness of a consumer. It is suggested that if there is a payment default as a result of poor assessment then the costs of any irresponsible lending should be borne by the creditor concerned.
Moreover, the draft regulations do not cater for the rescheduling of credit agreements and should be revised accordingly.
Another aspect not adequately catered for in the draft regulations relates to the right of the consumer to make an early repayment where the draft regulations, while recognising such a right, establish that the creditor is entitled to “compensation” for “possible costs” linked to the early repayment of the credit. In principle, one asks whether the consumer should be penalised by paying compensation if s/he decides to make an early settlement of the loan.
Information is an important aspect of the draft regulations. However, the regulations should be more emphatic in requiring that any information given to the consumer must be written in clear and plain language.
The draft regulations state that consumers may request, free of charge, a copy of the draft home agreement. I beg to differ on this count and suggest that a copy should be provided in good time prior to the signing of such an agreement, irrespective of whether or not the consumer asks for a copy. In most instances, the credit agreement is probably drafted by the creditor’s advisers with the sole aim of protecting the creditor’s interests whereas the consumer, possibly unfamiliar with such agreements, is asked to sign on the dotted line without the benefit of having ready access to independent advice.
Dr Micallef is a member of the Consumer Association. This contribution reflects only his views.