• A new standard is adopted to increase transparency, reinforcing the information that entities must provide customers about the characteristics of the product, the cost and the state at all times of their credit.
  • The protection of clients is increased by improving the assessment of their solvency by entities to reduce the risk of over-indebtedness

The Ministry of Economic Affairs and Digital Transformation has approved a Ministerial Order that modifies Order 2899/2011 on transparency and protection of clients of banking services.

The new norm reinforces the protection of the users of the credits revolving, usually associated with payment instruments, such as cards, which are characterized by having an indefinite duration, automatic renewal and payment of a periodic fixed fee by the client.

With the Ministerial Order, signed by the third vice-president of the Government, Nadia Calviño, transparency is increased and the information that entities must provide users in all phases is improved. In this way, clients will be able to know the characteristics of the product they are going to contract and to know more precisely the cost of the loan and the debt they periodically maintain with the entity.

The third vice president and minister for Economic Affairs and Digital Transformation, Nadia Calviño, stresses that, with the new regulation, "the contracting of this type of credit will be more transparent and with more information and greater user protection." The objective is "to avoid possible over-indebtedness and thus strengthen the security of the financial market and the protection of all consumers," he adds.

The regulations published today include new transparency obligations, such as more detailed pre-contractual information, which must reflect, among other things, a representative example of credit revolving with two installment options.

Likewise, the entity must send the client quarterly information specifying the evolution and situation of specific aspects of the loan, such as the amount, estimated date of completion of the loan payment if there were no modifications to the contract and various scenarios depending on of the variation of the monthly fee.

In any case, the borrower will have the possibility to request information about his loan at any time, as well as the amortization table or the amounts paid and pending. Finally, the entity's obligation is established to previously inform the borrower of each extension of the credit limit not requested by the client, including the new installment and the accumulated debt.

The new Order also strengthens the protection of clients to avoid an excessive extension of credit and an increase in the final burden of debt. To this end, the standard improves the solvency assessment carried out by entities and specific guidelines are introduced to ensure sufficient customer payment capacity throughout the life of the operation without incurring over-indebtedness. For this, it is established as a guideline that the annual amount of the installments allows to amortize a minimum annual amount of 25% of the credit limit granted.

Likewise, the information provided by the Bank of Spain's Risk Information Center is increased, which will allow entities to have more complete information and in less time from customers, which will lead to improved solvency analysis.

The modification of the norm that regulates credits revolving maintains the premises of the financial regulations approved in recent months: increase transparency, information and protection of customers, especially the most vulnerable.

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