In the previous entry Consumer Credit, what it is and why it is worth knowing, I wrote that the Consumer Credit Act of May 12, 2011 imposes many obligations on lenders and credit intermediaries that should be complied with by borrowers before concluding a consumer credit agreement. Today I am going to bring these responsibilities closer. It is worth getting to know them by looking for loans or credits for themselves on the market, because they correspond to the rights that consumers have at the stage preceding the conclusion of a loan agreement.
Responsibilities related to consumer credit advertising.
The creditor and the credit intermediary in the advertisement of consumer credit should provide data on the cost of the loan and provide it to the consumer in a clear, understandable and visible manner. These data include:
- the interest rate with separation of fees, which was included in the calculation of the total cost of the loan;
- the total amount of the loan ;
- the actual annual interest rate.
What is the total cost of the loan and the actual interest rate?
The total cost of the loan is all costs that the consumer is obliged to incur in connection with the loan. These will include, in particular: interest, fees, commissions, taxes and margins, costs of additional services when their incurring is necessary to obtain a loan (except for notarial fees).
However, the actual annual interest rate is the total cost of the loan borne by the consumer expressed as a percentage of the total loan amount on an annual basis.
In the types of loan agreements in which such data will be possible to provide, the consumer should additionally be informed in the advertisement about:
- the duration of the contract;
- the total amount to be paid together with the amount of installments;
- the price of a good or service (if the loan is intended to pay that price) and the amount of all advances (in the case of a credit agreement providing for deferred payment). Credit intermediary in consumer credit advertising should also specify the scope of authorization to make the factual or legal reasons relating to the loan, and whether the works with lenders, and if so, should indicate with what.
Imposing such obligations on lenders and credit intermediaries is a good solution, as many people conclude loan agreements under the influence of information contained in advertisements.
Consumer’s creditworthiness test.
Before concluding the contract, the creditor should assess the consumer’s ability to repay the loan together with interest on the dates specified in the contract. On the other hand, a consumer who seeks a loan is required to make available at the request of a creditor with information and documents needed to make such an assessment.
If the lender refuses to conclude a credit agreement with the consumer, relying on information on the consumer contained in the database (eg. The Credit Information Bureau or System BANKING REGISTER), shall immediately and free of charge inform the consumer indicating the database, which carried out the checks. Such information allows the consumer to request an appropriate database to present the information gathered about him.
The obligation to test creditworthiness is to counteract excessive consumer indebtedness and contribute to the elimination of so-called loans granted “as proof”. In practice, this obligation can be implemented in a different way by various financial institutions. Banks in this study are required to take into account the recommendations of the Polish Financial Supervision Authority ( Recommendation T issued by the PFSA on 23 February 2010 regarding good practices in the risk management of retail credit exposures), and institutions that are not subject to supervision by the PFSA do not have such an obligation (e.g. loan). This means that the results of such an assessment may differ significantly.
Information form for the consumer.
The act on consumer credit introduced the so-called an information form in which basic information about the loan should be provided, which the creditor or credit intermediary should provide to the consumer before the conclusion of the loan agreement. The form of this form is set out in Annex 1 to the Act. It is very important that all lenders and credit intermediaries should use it in the same form, which makes it easier to compare offers and decide which one to choose.
Data that should be provided to the consumer on the information form are, among others:
- type of loan,
- the duration of the contract,
- the interest rate and the terms of its change,
- the total amount of the loan, the date and manner of payment of the loan,
- the actual annual percentage rate and the total amount to be repaid by the consumer,
- information on the required security or the obligation to conclude a credit insurance contract,
- information about the need to pay notarial fees (if any).
The information form containing the credit data should be delivered to the consumer on the so-called durable medium. A permanent carrier in accordance with the Act is a material or device used for storing and reading information, for a period of time appropriate to the purposes for which this information is used and allowing the reproduction of this information in an unchanged form. A durable medium will therefore be a document made on paper, as well as in an electronic form (eg as a PDF file) stored in a USB memory stick, on a CD-ROM, DVD, on a memory card or a computer hard drive, as well as on a website, if it will be possible to store and read information provided to the consumer.
In addition, before concluding a credit agreement, the creditor and the credit intermediary are required to provide the consumer with explanations on the information they have provided and on the content of the proposed contract. The consumer has the right to ask and expect answers to their questions. This obligation is defined as a pre-contractual assistance. As a consumer, you can also request a lender or a loan broker to issue a draft loan contract free of charge if you meet the conditions for obtaining a loan after completing the creditworthiness assessment. The draft loan agreement should include your data as a customer and all terms on which a consumer loan could be granted to you.
What are the other responsibilities of a loan broker?
If the contract of consumer credit is to be concluded with the participation of the credit intermediary is obliged also to convey to the consumer on a durable medium, information regarding the scope of authorization to make the factual or legal reasons relating to the loan and indicate whether working with lenders (as in the case of advertising). The consumer should also be informed about the amount of any costs for activities related to the preparation, offering, concluding or performance of a credit agreement that the credit intermediary will collect from the consumer. A credit intermediary should also inform the consumer whether he receives remuneration from the creditor.
The fulfillment of these obligations by credit intermediaries is to help consumers to find out whether a credit intermediary presenting credit offers from specific lenders chooses the best available on the market, or rather the offers of those lenders with whom it is associated.
In the next post you will find out how the consumer credit agreement should be formulated and what rights are available to the consumer based on it. All you need to do is click on this link: Consumer credit agreement and consumer rights based on it.