ALTERNATIVE FINANCING BY ENTITIES OTHER THAN BANKS: CONSUMER CREDIT AGREEMENTS
- Act 16/2011, of 24 June, regarding consumer credit agreements
Over the last three decades, the credit market has undergone considerable development, while its agents and financial techniques have evolved very rapidly. Act 16/2011 is intended to incorporate Directive 87/102/EEC into Spanish law.
This Act applies to any agreements where the lender (natural or legal person who grants or agrees to grant a credit in exercising their commercial or professional activity) grants or agrees to grant a consumer (natural person, who in contractual relations regulated by this Act, intervenes for purposes outside their commercial or professional activity) a credit in the form of deferred payment, loan, opening of credit or any equivalent means of financing.
This Act regulates any loan, credit or equivalent means of financing for an amount from 200 euros upward, intended to meet any personal requirement regardless of the applicant’s professional or business activity.
- Consumer credits
Under a consumer credit agreement, a lender grants or agrees to grant a consumer a loan in the form of deferred payment, loan, opening of credit or any equivalent means of financing.
The agreements excluded by article 3 of the Consumer Credit Act shall not be considered credit agreements:
- Credit agreements guaranteed by a mortgage;
- Credit agreements whose purpose is to acquire or conserve property rights over land or buildings, already constructed or pending construction;
- Credit agreements whose total amount is less than 200 euros;
- Leasing or financial leasing agreements which do not establish an obligation to purchase the object of the agreement;
- Credit agreements granted as an overdraft facility and which must be repaid within a maximum term of one month;
- Credit agreements granted free of interest and with no other type of costs, and credit agreements by which the credit must be repaid within a maximum term of three months and by which only minimal costs must be paid ;
- Credit agreements granted by employers to their employees;
- Credit agreements entered into with investment services companies or credit institutions;
- Credit agreements that are the result of an agreement reached in court;
- Credit agreements relating to the deferred payment of an existing debt, without interest, commissions or other costs;
- Credit agreements by which the consumer is asked to provide the lender with an asset as a security guarantee.
- Transparency
The Act lays down the obligation to provide consumers with the information necessary for their proper understanding. Furthermore, for their consent to be valid, either prior to the agreement, during its term of validity or upon its expiry, such information shall be recorded on paper or on any other durable medium.
Failure to comply with the requirements relating to prior information and the provision thereof set forth in articles 10 and 12 of this Act shall allow the agreement to be terminated.
- Binding offers
As regards binding offers, a lender who offers a consumer credit shall be obliged to provide a document with all the credit conditions, in terms identical to those laid down in article 10 regarding information prior to the agreement, if the consumer so requests, as a binding offer that must be maintained for a minimum period of fourteen calendar days as from its delivery, unless there exist extraordinary circumstances attributable to the lender or not.
- Obligatory information
The necessary information that is ultimately provided to the consumer may be summarized as: type of credit; identity and registered office of the lender and the intermediary; amount of the credit and the conditions that govern the availability of funds; duration of the agreement; borrowing rate and the conditions for applying said rate; the annual equivalent rate and the total amount owed by the consumer; the amount, number and frequency of payments to be made by the consumer and, where appropriate, the order in which payments must be allocated to different outstanding balances subject to different borrowing rates for the purposes of reimbursement; additional costs and ancillary services; the default interest rate; warnings regarding the consequences of non-payment; guarantees required as the case may be; the existence or absence of the right of withdrawal; right to early repayment; consumer’s right to receive, free of charge, upon request, a copy of the project.