Updated: October 2019
ESBG believes that providing simple and shorter information to consumers will correspond more on the client’s
expectations and will have a positive effect on their well informed decision.
Simplification of information
MCD, like CCD, requires creditors to give excessively detailed information to the consumer prior to entering
a consumer credit agreement. Nonetheless, consumers ignore information which is too complex or difficult
to remember and there is evidence that simpler information with fewer figures is much more effective
at landing critical messages. That information may refer to information that only reflects the specifics
of the product and meets with client’s expectations for short and clear information – for example –
the repayment periods, the amount of the repayment instalments and the applicable interest rate.
Reduction of information
Regarding the pre-contractual information, it is important to focus on diminishing the number of precontractual documents, which banks are obliged to serve to consumers in any case. This approach has
not proved itself to be useful for consumers and for that reason the requirements for serving pre-contractual
information and Standard European Consumer Credit Information aren’t helping in achieving the objectives
of the Directive. Bearing digitalisation in mind, the required information can barely be presented in a clear
and comprehensive way on mobile devices.
The reduction of information may be also observed through the role of the right of withdrawal. The right of
withdrawal is an instrument for the consumer’s protection and when it is granted to the consumer it should
diminish some of the requirements for the service providers, especially in the field of the pre-contractual
information that needs to be provided to consumers. If the amount of information is not diminished,
there is not a substantial meaning of the right of withdrawal.
Definition of foreign currency loans
ESBG would like to make a proposal to change the current
definition of a foreign currency loan making cumulative and
non-alternative the conditions.
These two currencies (income and of place of residence) are considered by the MCD as sufficiently
protective of the consumer to propose them as limiting the foreign exchange risk of a loan in a currency.
The notion of foreign currency therefore seems legitimate only to apply to a currency that is different from
both the currency of income and the currency of the place of residence, which correspond to the proposal
of a "cumulative" definition.
The EU Mortgage Credit Directive aims to integrate the market for mortgage credit, promote common standards
across the bloc and protect consumers at an EU level through responsible lending. The 2014 MCD applies to
all loans available to consumers when buying residential property. It has the following provisions:
Since the MCD came into force, there have been numerous additions in the form of supplementary acts (both
implementation and delegated) to help strengthen the original text.
The Mortgage Credit Directive ‘study’ is due out in 2019 and will focus only on the topics listed in Articles 44
and 45 of the current directive. It will look into the effectiveness and appropriateness of the provisions on
consumers and the internal market. The study will also look into digitalisation and sustainable finance (for
example, the EC-funded study on green mortgages). Depending on the conclusions of the Study and the
Commission’s assessment, legislative changes may be proposed. Some issues have already been identified
as being particularly relevant to the review:
Financial institutions are willing to adapt their mortgage lending process but call for adequate
implementation deadlines and help with any additional IT support or other additional costs.
A proportionate application of the mortgage credit directive could also be examined in more detail
by a cost-benefit analysis.
In our view it is very important that during the revision the Commission assesses the consumers’
understanding of, and satisfaction with, the ESIS Art. 44a from the Directive. The effectiveness and
appropriateness of the Directive should be the core focus of the Commission study.
The Commission should examine the current definition of foreign currency loans. The market is
experiencing difficulties in the application of the rules and we note that due to the current definition
there are cases that fall within the scope of foreign currency loans for which the consumer protection
measures set out in the Directive should not be addressed or are disproportionate to actual risk for
It would be beneficial for consumers to narrow the scope, establishing that the definition will imply
cumulative conditions (being residence and receiving the incomes or holding the assets in a currency
other than the credit is to be repaid). As a result, the current regime excludes certain consumers from
mortgage credit, while creditors would be willing to provide credit in a number of scenarios if the
foreign currency loan regime were better aligned with the real risks.
The review of the Mortgage Credit Directive is expected soon. In our opinion, there is a need for guidance
from the Commission on pre-contractual information and how best to provide ‘barrier-free’ information on,
for example, smartphones.
In our view, there is also a problem with cross-border loans which is not only related to the MCD, but also: