• The new regulations will improve the protection of customers of this type of credit, which is characterized by automatic renewal and payment of a fixed monthly fee
  • The modification of the norm reinforces the information that the borrower receives from the entity and reduces the risk of excessive credit extension and increase

The Ministry of Economy and Business has published in a public hearing the proposal to modify Order 2899/2011 of transparency and protection of the client of banking services. The objective is to reinforce the protection of the users of the credits that are characterized by having an indefinite duration or automatic renewal, by the possibility of the client to determine the fixed fee to be paid periodically within a parameter, and that are associated with payment instruments , such as the so-called "revolving cards", increasing the transparency and information that entities must provide to these users and reducing the chances of over-indebtedness.

Specifically, the draft Order reinforces the information that the borrower receives from the entity, which will allow him to have a specific and clear knowledge of the content and effects of the service he is going to hire, as well as to know precisely the debt that he periodically maintains with the entity.

In this sense, new transparency obligations are included that include more detailed pre-contractual information, which reflects, among other things, a representative example of revolving credit with two quota options. Likewise, the entity must send quarterly information to the client in which the evolution and situation of specific aspects of the credit are specified, such as the amount of the loan, estimated date of completion of the payment of the credit if there are no changes in the contract and various scenarios depending on the variation of the monthly fee.

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

The modification of the norm also aims to reduce a possible excessive extension of credit and increase the final debt burden beyond the reasonable expectations of the person hiring this product. For this purpose, the order incorporates specific guidelines aimed at financial institutions in relation to the solvency assessment for this type of products, so that a more prudent estimate is made to ensure sufficient customer payment capacity and avoid over-indebtedness.

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