Private Translation of Order EHA/2899/2011,

Transcription

1 1 Private Translation of Order EHA/2899/2011, 28 October, on transparency and protection of clients of banking services Disclaimer: The translation does not only include all the annexes This is a private translation and therefore, the only valid legal text is the one published in Spanish Official Gazette Title l. General Regulations Article 1. Purpose. Article 2. Scope of application. Article 3. Commissions. Article 4. Interest rates. Article 5. Advertising. Article 6. Pre contractual Information. Article 7. Contractual Information. Article 8. Communications to the client. Article 9. Suitable explanations. Article 10. Advice. Article 11. Formal requirements and highlighted information. Article 12. Related banking services. Article 13. Duty of diligence in the execution of orders and correction of errors. Article 14. Sanctioning regime. Title II. Deposits. Article 15. Sight deposits. Article 16. Term deposits with guarantee of capital. Article 17. Advertising and contractual documentation. Title III. Credits, loans and payment services. Chapter I. Responsible lending. Article 18. Evaluation of the solvency. Chapter II. Regulations on mortgage credits and loans Section 1. General regulations. Article 19. Scope of application. Section 2. Pre contractual Information. Article 20. Mortgage Loan Access Guide. Article 21. Pre contractual Information Sheet. Article 22. Personalized Information Sheet. Article 23. Binding Offer. Article 24. Additional information on interest rate risk hedging instruments. Article 25. Additional information on floor and ceiling clauses. Section 3. Interest rates. Article 26. Variable interest rates. Article 27. Official interest rates. 1

2 2 Article 28. Reference indexes and rates applicable in order to calculate the market value in the compensation for interest rate risk. Section 4. Contractual document and execution act. Article 29. Contractual documentation. Article 30. Execution act. Section 5. Annual Percentage Rate. Article 31. Calculation of the Annual Percentage Rate. Section 6. Reverse mortgage. Article 32. Transparency regime. Chapter III. Regulations on consumer credits. Article 33. Transparency regulations for consumer credits. Chapter IV. Regulations on payment services. Article 34. Transparency regulations for the payment services. Single temporary regulation. Temporary reference indexes and rates regime. Sole repealing regulation. Regulatory repeal. First final regulation. References to the transparency regulations in Act 2/2009, of 31 March, which regulates the contracting with the consumers of mortgage loans or credits and brokering services for signing loan or credit contracts. Second final regulation. Modification of Order EHA/1608/2010, of 14 June, on transparency of the information conditions and requirements applicable to the payment services. Third final regulation. Development powers. Fourth final regulation. Competence title. Fifth final regulation: Entry into force. Appendix I. Pre contractual Information Sheet (FIPRE). Appendix II. Personalized Information Sheet (FIPER). Appendix III. Pre contractual Information Sheet (FIPRE) for reverse mortgages. Appendix IV. Personalized Information Sheet (FIPER) for reverse mortgages. Appendix V. Calculation of the Annual Percentage Rate. I Transparency in the functioning of the markets has traditionally been one of the most sought after objectives by the legal code of any economic sector. The correct allocation of the resources cannot really be done, and neither is it feasible to fully guarantee competition, if there is no proper legal framework to protect the clients which, by limiting the effects of the information asymmetry, allows them to adopt their financial decisions in the most suitable manner. 2

3 3 Within the financial sector, and leaving aside the protection deriving from the existence of deposits and investors guarantee funds, the defence of the clients has traditionally revolved around two core themes. On the one hand, the prudential and solvency regulations of the credit institutions, although primarily aimed at market stability, have a direct and very important effect on the protection of the clients. On this matter, the institutions are subject to some of the most demanding professional rules throughout the legal code which clearly favours their soundness and reliability within the financial trade. On the other hand, the financial legislation also has a special system to directly protect the client. Apart from protecting the users of investment and insurance services who have very complete and systematic regulations, and beyond the general defence of consumers, the protection of clients of banking service seeks to mitigate the effects which derive from the information disadvantage, promoting transparency in the institution client relations throughout the banking negotiation process. These transparency regulations have been deployed in Spain through the development of Article 48.2 of the Credit Institutions Discipline and Intervention Act 26/1988, of 29 July. This rule, expressly aimed at protecting the legitimate interests of the clients of credit institutions, and without prejudice to the freedom to contract, provided the Treasury Minister with the power to pass the regulations necessary in order to protect said relations between the credit institutions and their clients and lead them to maximum transparency. The first regulatory development which gave content to said regulations took place over two decades ago. The Order of 12 December 1989 on interest rates and commissions, rules of action, information to clients and advertising of the credit institutions is, since then, the general framework to regulate the essential issues of the retail financial trade like for example the commissions, interest rates and the communications with the client. A little later, use was made of the same regulatory power to regulate mortgage loans, the classic retail banking service. On this matter, in order to provide the client with full knowledge about the financial implications of the mortgage contract, in the mid nineteen nineties the Order of 5 May 1994, on transparency of the financial conditions of the mortgage loans, entered into force. Since then the financial transparency legislation has continued advancing in certain sectorial areas. For example the Consumer Credit Contract Act 16/2011, of 24 June, dedicated to this specific banking service; Act 2/2009, of 31 March, which regulates the contracting with the consumers of mortgage loans or credits and broking services for the signing of loan or credit contracts, which extends the transparency regime to other financial intermediaries other than the credit institutions; and on the regulatory level, Order EHA/1608/2010, of 14 June, on transparency of the information conditions and requirements applicable to the payment services, and Order EHA/1718/2010, of 11 June, regulating and controlling the advertising of banking services and products. At this point it can be clearly seen how the common or general Spanish transparency regulations (Ministerial Orders of 1989 and 1995 and Bank of Spain Circular 8/1990 which develops them) have become unjustifiably obsolete. On the one hand, due to said advances in the sectorial regulations in areas like consumer credit, payment services or advertising. And on the other hand as a result of the enormous transformation undergone by the marketing of banking services from the beginning of the nineteen nineties to present. This transformation is closely linked to circumstances like the enormous expansion of the credits, particularly mortgages, the increase and complete generalisation of retail access to banking services, the appearance of new increasingly complex financial instruments, the spread in the use of new technologies in the relations with the clients and, without doubt, also due to the profound crisis in the financial sector in recent years. 3

4 4 Within the previous background, the Sustainable Economy Act 2/2011, of 4 March, sought to significantly improve banking transparency. Its contributions and new features are twofold. On the one hand, a new regulatory intervention focus has been introduced into our code which, despite its relevance in the international debate, was still not in our law. It seeks to promote responsibility in the loan. For such purpose, said Act has established not only the obligation to perform suitable evaluation of the clients solvency (a practice, on the other hand, completely widespread amongst the Spanish credit institutions), but also the need to actively promote a whole list of practices aimed at guaranteeing the responsible granting of the loans. And on the other hand, said Act has expressly authorised the Treasury Minister, granting a period of six months, to pass the rules necessary in order to guarantee the proper level of protection of the users of financial services in their relations with the credit institutions. This Order therefore uses and performs the above authorisation with a threefold objective. On the one hand, to concentrate in a single text the basic transparency regulations so that, in a systematic and illustrative manner, the codification of the issue in itself improves its clarity and accessibility for the citizens, thereby solving the current regulatory dispersion. Secondly, the regulation seeks to update the set of provisions relating to the protection of the banking client, in order to rationalise, improve and increase where it was necessary, the transparency and conduct obligations of the credit institutions. As such, in line with reforms introduced in a large part of comparative law, our county improves the requirements in areas like information on interest rates and commissions, communications with the clients, (pre) contractual information, related financial services, etc. The Order also includes an express mention to the advice in order to guarantee that the provision of this banking service is always done in the client s best interest, and properly assessing their situation and all of the services available on the market. Thus, such service is distinguished from the direct marketing by the institutions of their own products, an activity which is subject to the general transparency and proper explanations regime. Finally, the electronic resources are definitively recognised as a mechanism for all purposes comparable to the traditional paper support in the credit institutions relations with their clients. And finally the rule develops the general principles set out in the Sustainable Economy Act concerning the responsible loan, introducing the corresponding obligations so that the Spanish financial sector, in the benefit of the clients and market stability, improves the prudence levels in granting this type of operation. For these purposes, a system has been designed based on evaluating the solvency, which is aimed at assessing the risk of non payment when looking at the possible granting of a loan and which must not under any circumstances be an obstacle to credit access to the population but should provide a legal stimulus to healthier and more prudent behaviour by institutions and clients. Additionally, the rules tackle other areas which are also of particular importance, out of which the following three could be highlighted. First of all, the specific development is tackled of the mortgage transparency regulations for home acquisitions in order to replace the previous regulations from The new transparency system, in line with the already approved consumer credit regulations and with the planned Europe wide regulations, is designed on a series of unified pre contractual and contractual information requirements. Other more specific tools are also added like the diffusion of an informative guide adapted to this product which goes into more detail in the necessary financial education of the clients. Transparency is also specifically reinforced as regards certain services: the floor and ceiling (maximum and minimum rates) clauses and the interest rate financial hedging instruments. The existence of both services II 4

5 5 linked to the mortgage loans was already envisaged in the legal code, and all this Order does is to reinforce as much as possible the transparency obligations and diffusion of relevant information which the client must consider before contracting. Within the same framework, and as regards the reverse mortgage, the Order develops the provisions in the first additional regulation of Act 41/2007, of 7 December, which modified the Mortgage Market Regulations Act 2/1981, of 25 March, and other regulations of the mortgage and financial system, regulating reverse mortgages and the dependency insurance and which establishes certain tax regulations. And finally the rule also regulates the official interest rates according to the authorisation included in the aforementioned Article 48.2 of the Credit Institutions Discipline and Intervention Act 26/1988, of 29 July. The modification responds at this point to the need to adapt the reference rates to an increasingly greater integration of the markets on the European and national level and the need to increase the alternatives for choosing the rates, whilst at the same time adapting them to the real cost of obtaining resources by the credit institutions. This Order is passed using the powers expressly granted to the Treasury Minister in Article 29.2 of the Sustainable Economy Act 2/2011, of 4 March, Article 48.2 of the Credit Institutions Discipline and Intervention Act 26/1988, of 29 July, and in the first additional regulation of Act 41/2007, of 7 December, which modified the Mortgage Market Regulations Act 2/1981, of 25 March, and other regulations of the mortgage and financial system, regulating reverse mortgages and the dependency insurance and which establishes certain tax regulations. By virtue of which, in accordance with the State Council, I stipulate: Article 1. Purpose TITLE I General Regulations The purpose of this Ministerial Order is to guarantee the appropriate level of protection of the clients of credit institutions, through the implementation of transparency measures in the provision of financial services. Article 2. Scope of application. 1. This order will be applicable to the banking services aimed at or provided to clients, or potential clients, in Spain by Spanish credit institutions or branches of foreign credit institutions. For these purposes clients and potential clients shall be considered the individuals. Furthermore, for the purposes of this order, banking services shall be considered those which are included in the cashier services, repayable funds raising, particularly deposits, the granting of credit and loans, the payment services and the other activities included in Article 52 of the Credit Institutions Discipline and Intervention Act 26/1988, of 29 July, except for those mentioned in letter h) to m). 2. Excluded from the scope of this Ministerial Order are the services, operations and activities included within the scope of the Stock Market Act 24/1988, of 28 July, the Collective Investment Institutions Act 35/2003, of 4 November, the Consolidated Private Insurance Regulation and Supervision Act, passed by Legislative Royal Decree 6/2004, of 29 October, the Consolidated Pension Plans and Funds Regulation Act, 5

6 6 passed by Legislative Royal Decree 1/2002, of 29 November, and the Private Insurance and Reinsurance Mediation Act 26/2006, of 17 July. 3. The provisions in section 6 of chapter II of title III shall be applicable to the insurance companies. 4. When the client acts within the scope of his professional or business activity, the parties can agree that this Order is not or only partially applied, with the exception of that established in chapter II of title III. Article 3. Commissions. 1. The commissions received for services provided by the credit institutions shall be those which are freely established between said institutions and the clients. Commissions can only be received and expenses can only be passed on for services which are actually requested or expressly accepted by a client and provided that they respond to services effectively provided or expenses incurred. 2. The credit institutions must make available to the clients, duly updated, the commissions normally received for the services which they most frequently provide, as well as the expenses passed on in said services, all in a unified format, according to the specified terms which will be determined by the Bank of Spain. This information shall, under all circumstances, include in a simple manner and which facilitates comparison between institutions, the concepts which yield commissions, the regularity with which they are applied and their amount, broken down into the periods in which they are applied. This information shall be available at all of the commercial premises of the credit institutions, on their electronic pages and on the electronic page of the Bank of Spain, and must be available to the clients at any time and free of charge. 3. Immediately before a banking service is going to be provided to a client via a remote communication method or cash machine (ATM) or similar method, the commission applied for any concept and the expenses to be passed on must be indicated via a clear, perfectly perceivable and free message. Once said information has been provided, the client shall be offered, also free of charge, the possibility of withdrawing from the requested operation. When the banking service is going to be provided through a cash machine (ATM) or similar device and the entity issuing the payment method is other than its owner, the information set out in the previous paragraph can be substituted for the maximum value of the commission and other additional expenses to which the requested operation could be subject. In this case, they must be informed that the amount finally charged may be lower depending, if applicable, on the conditions stipulated in the contract signed between the clients and the entity issuing the payment method. 4. For banking services provided through a remote communication method or cash machine (ATM) or similar method, an incident telephone number must appear in a visible place, which can be called in the event that there is any problem with the provision of the services. Article 4. Interest rates. 6

7 7 1. The interest rates applicable to banking services, whether deposit, credit or loan operations, shall be those freely established between the credit institutions providing them and the clients, whatever the type and term of the operation. 2. The credit institutions must make available to the clients, duly updated, the interest rates normally applied to the services which are most commonly provided, in a unified format, according to the specific terms which will be determined by the Bank of Spain. This information shall under all circumstances include, in a simple manner and which facilitates comparison between institutions, the annual percentage rate (APR) or other equivalent expression of the operation. For these purposes, annual percentage rate shall be considered that which equals on any date the current value of the cash received or delivered throughout the operation, for all concepts, including the balance remaining at the end, with the exceptions and indications determined by the Bank of Spain, without prejudice to the provisions of Article 31 and in the appendices to this Order. The formula used to obtain said information must be clearly stated, whether directly or by reference to the Boletín Oficial del Estado (Official State Gazette) in which the regulation which contains the formula is published. This unified information shall be available at all of the commercial premises of the credit institutions, on their electronic pages and on the electronic page of the Bank of Spain, and must be available to the clients, at any time and free of charge. 3. The entities which allow tacit overdrafts in the deposit accounts or tacit over limits in the credit accounts must publish, in the manner and with the indications established by the Bank of Spain, the commissions, interest rates or surcharges applied in these cases. These rates shall be compulsory for all of the operations of that nature which do not have any lower ones contractually established. In particular, the entities shall state separately the rates applicable to the tacit overdrafts referred to in Article 20 of the Consumer Credit Contracts Act 16/2011, of 24 June. Article 5. Advertising. All advertising by the credit institutions relating to the banking services must be clear, objective and not misleading, according to the provisions of Order EHA/1718/2010, of 11 June, regulating and controlling the advertising of banking services and products and in Bank of Spain Circular 6/2010, of 28 September, to credit institutions and payment entities, on the advertising of banking services and products. Article 6. Pre contractual Information. The credit institutions must provide free of charge to the clients of banking services all of the pre contractual information which is legally required in order to adopt an informed decision on a banking service and compare similar offers. This information must be clear, appropriate and sufficient, objective and not misleading and must be delivered sufficiently in advance according to the type of contract or offer and, in any case, before the client becomes bound by said contract or offer. Article 7. Contractual Information. 1. The credit institutions must deliver to the client the corresponding copy of the contractual document in which the service received is formalised. 2. The credit institutions must keep the contractual document and make a copy of it available to the client 7

8 8 whenever thus requested. The notarial regulations shall apply as regards the clients obtaining copies in operations formalised in notarial document. 3. The contractual documents relating to repayable funds raising banking services, particularly deposits, and granting credits and loans, must expressly and clearly contain the following points: a) The nominal interest rate, the APR or other equivalent expression of the effective cost or total remuneration in terms of annual interest, according to that established for the purpose by the Bank of Spain taking into account, if applicable, the pecuniary value of any remuneration in kind. b) The frequency with which the interest shall be yielded, the yield dates and their liquidation dates, the formula or methods used in order to obtain, from the nominal interest rate or from the other cost or remuneration factors which are relevant, the amount of the interest yielded and, in general, any other data necessary in order to calculate said amount. c) The applicable commissions and payable expenses, specifically indicating their concept, amount, yield and liquidation dates, and in general any other details necessary in order to calculate the amount of such concepts. d) The duration of the deposit, loan or credit and, if applicable, the conditions for their extension. e) The regulations relating to the applicable value dates. f) The rights and obligations which correspond to the credit institution in order to modify the agreed interest rate, or in order to modify the applied commissions or payable expenses; and the rights which may be enjoyed by the client when such a modification occurs. g) The rights and obligations of the client as regards cancelling the deposit or loan and its early repayment and the total cost involved in using such powers. h) The consequences for the client of breaching its obligations, particularly that of non payment in the case of credit or loan. i) Anything else established by the Bank of Spain. Similar mentions, insofar as appropriate, must appear on the other contracts subject to this Order, according to the instructions which may be established by the Bank of Spain. Article 8. Communications to the client. 1. Any communication from the credit institutions, under the terms set out in the corresponding regulations, regarding any of the banking services set out in this Order, must: a) clearly and accurately reflect the terms under which the services are developed; b) not emphasis any potential benefit of the service expressly concealing the risks inherent to them; 8

9 9 c) be sufficient in order that the most common addressee properly understands the essential terms of the service, and; d) not omit or distort any relevant information. 2. When a credit institution is entitled to unilaterally modify any term of a banking service contract it must communicate to the client, giving at least one month s notice, provided that the initial duration of the contract exceeds this term, the exact terms of said modification or extension and the rights which, if applicable, the client has in relation to them. In the cases of modifications of limits or ability to withdraw new amounts, when there has previously been a breach of obligations by the client, the communication shall give at least ten days notice. However, the modifications which are in the client s favour can be applied immediately. 3. The credit institutions shall provide to their clients on each liquidation of interest or commissions which are made for their services, a liquidation document which will clearly and precisely state: a) The nominal interest rate applied in the period already due and, if applicable, that to be applied in the period which is starting. b) The commission applied, specifically indicating its concept, base and accrual period. c) Any other expense included in the liquidation. d) The taxes retained. e) And, in general, all information which is necessary so that the client can check the liquidation made and calculate the cost of the service. The Bank of Spain can establish standardised liquidation models. Furthermore, in the cases established by the Bank of Spain, reference must also be made to the cost or effective yield remaining from the operation, according to the indications that it establishes. 4. The credit institutions shall send their clients annually, during the month of January of each year, a communication which, completely and in detail, contains the information set out in this order on commissions and expenses yielded and interest rates effectively applied to each banking service provided to the client during the previous year. For these purposes, the Bank of Spain shall establish a unified document for making this type of communication which shall, under all circumstances, take into account the different commercial practices of each institution. 5. The credit institutions must provide the information which allows the heirs of a client, after such condition is proven, to know their asset situation in the credit institution at the time of the deceased s death. Article 9. Suitable explanations. The credit institutions must provide all clients with suitable and sufficient explanations in order to understand the essential terms of every banking service offered and to adopt an informed decision, taking into account their needs and financial situation. 9

10 10 These explanations shall include a clarification of the content of the information and communications to which this order refers, as well as an indication on the consequences which signing a contract for banking services may have for the client. Article 10. Advice. When the credit institutions and the clients decide to sign a banking advice service contract they must expressly inform the clients of this circumstance and, unless the service is free of charge and the client is informed of this, they will have to receive independent remuneration for this concept. The provision of this service shall be subject to the transparency regime set out in this Ministerial Order and shall imply the obligation on the credit institutions to act in the client s best interests, basing such advice on an objective and sufficiently wide analysis of the banking services available on the market, and considering both the personal and financial situation of the client, as well as their preferences and objectives. For the purposes of this Article, advice shall be considered as any personalised recommendation that the institution makes for a specific client regarding one or more banking services available on the market. Article 11. Formal requirements and highlighted information. 1. All information, documentation and communications sent to the clients of banking services set out in this Order shall be made on paper, electronic format or in another lasting support, and shall be drafted in easily understandable terms, clearly legible, in Spanish or in any of the other Official Spanish languages of the respective Autonomous Regions in which the service is provided or in any other language agreed between the parties. 2. In order to stress to the clients the essential elements of the information referred to in Articles 3 to 6, the Bank of Spain can require the use of a format or type of letter or especially highlighted communication. Article 12. Related banking services. The credit institutions which market banking services linked to the contracting of another service, whether financial or not, must inform the client, expressly and in an understandable manner, about the possibility or not of contracting each service in an independent manner and under what conditions. In the case that it is only possible to contract the banking service linked to the contracting of other services under the conditions offered, the client shall be informed in the manner set out in Article 11 of the part of the total cost which corresponds to each of the services, insofar as this cost is available to the entity, and of the effects of not contracting individually or early cancellation which would be produced on the total cost of the banking services. Article 13. Duty of diligence in executing orders and correction of errors In all of the banking services, and independently of punctually applying the rules on availability of funds and corresponding valuations, the entities shall provide the means necessary in order to execute the clients orders without delays, using for such purpose maximum diligence. The same diligence shall be required in the correction of the detected errors, whether by the entity or its clients, as well as in the communication of the results of the operations contracting requests which are made by the clients. 10

11 11 Article 14. Sanctioning regime. 1. The provisions of this Order will have the condition of organisation and disciplinary regulations, according to the provisions of Articles 1.5 and 48.2 of Act 26/1988, of 29 July, and 29.2 of the Sustainable Economy Act 2/2011, of 4 March, and their breach shall be sanctioned in accordance with the provisions of 26/1988, of 29 July. Breach of the provisions of this Order shall be sanctioned according to that set out in Article 18 of the Act 22/2007, of 11 July, on remote marketing of financial services aimed at consumers, in the cases where it is applicable to them. 2. The specific regime established in this Order shall be applied without prejudice to the general legislation on consumers and users. TITLE II Deposits Article 15. Sight deposits. 1. Without prejudice to the provisions of Order EHA/1608/2010, of 14 June, on transparency of the conditions and information requirements applicable to the payment services, the credit institutions must communicate to the client, free of charge and at least monthly, the summary of all of the movements in their current account, if any, with information relating to the date, concept and amount of the operation. In any event, the client must be provided with a copy of the information relating to any operation made through any sight deposit. 2. The credit institutions must actively collaborate and exchange all of the information which is necessary, between themselves and with the client itself, in order to facilitate the effective and agile transfer to another credit institution of the most common financial operation which use as support a sight deposit, like regular direct debits, permanent transfer orders and regularly received transfers. Article 16. Term deposits with capital guarantee. The contractual documents relating to structured or hybrid term deposit banking services must expressly and clearly contain the obligation on the institution to refund the capital of the deposit on expiry, as well as the nominal interest rate, the APR or other equivalent expression of the total effective remuneration in terms of annual interest, according to that established by the Bank of Spain taking into account the effects on the remuneration both from the principal contract and from the implied derivative. Article 17. Advertising and contractual documentation. 1. The advertising made by the credit institutions in order to market deposits must include a reference to the Deposits Guarantee Fund to which the entity is a member, when it is different to those set out in Royal Decree 2606/1996, of 20 th December, on Credit Institutions Deposits Guarantee Funds. 2. The contractual documents relating to banking deposit services must include a reference to the Deposits Guarantee Fund to which the entity is a member, indicating, when it is different to those set out in Royal 11

12 12 Decree 2606/1996, of 20 th December, on Credit Institutions Deposits Guarantee Funds, its name duly translated, its address and, if applicable, its electronic page address. Article 18. Evaluation of the solvency. TITLE III Credits, loans and payment services CHAPTER I Responsible lending 1. The credit institution, before any credit or loan contract is signed, must evaluate the client s capacity to meet the obligations deriving from it, on the basis of the sufficient information obtained by suitable means for such purpose, including the information provided by the client itself on request from the institution. For these purposes, the creditors must have specifically developed internal procedures to perform the solvency evaluation mentioned in the previous paragraph. These procedures shall be regularly revised by the creditors, which shall keep up to date registers of said revisions. 2. The procedures referred to in the previous section, apart from complying with the specific regulations on risk control and internal control which is applicable to the credit institutions, must at least cover the following aspects: a) The appropriate evaluation of the employment, income, asset and financial situation of the client, for the purpose of which: 1 st. All documentation shall be required which is necessary in order to assess the variability of the client s income. 2 nd. The client s credit history shall be consulted, for the purpose of which the Risks Information Centre of the Bank of Spain can be contacted, as well as the asset and credit solvency files referred to in Article 29 of the Organic Personal Data Protection Act 15/1999, of 13 December, under the terms and with the requirements and guarantees set out in said organic act and its development regulations. 3rd. The expected income level after retirement shall be taken into account in the event that it is forecast that a substantial part of the credit or loan will continue to be repaid after the end of the working life. b) The valuation of the client s capacity and of the guarantees to fulfil its payment obligations deriving from the credit or loan, for the purposes of which it shall be taken into account, apart from their income, the assets owned, their savings, their obligations under other debts or commitments, their fixed expenses and the existence of other possible guarantees. c) In the case of credits and loans at variable interest rate, and others in which the value of the instalments may significantly vary during the life of the operation, it must be assessed how this circumstance could affect the client s ability to meet its obligations taking into account the information referred to in the previous paragraph. 12

13 13 d) In the case of mortgage credits and loans or other real guarantees, the prudent valuation of such guarantees via processes that avoid influences or conflicts of interest which could reduce the quality of the valuation. 3. In the case of credits or loans with real guarantee, the criteria to determine whether to grant the credit or loan or not, its maximum amount and the characteristics of its interest rate and of the repayment system must preferably be based on the estimated capacity of the client to meet its payment obligations throughout the life of the credit or loan, and not exclusively on the expected value of the guarantee. 4. In the case the credit or loan repayment insurance is signed, this cannot under any circumstances substitute the necessary and complete evaluation of the client s solvency and their capacity to meet their payment obligations by themselves. 5. In the case that a creditor refuses to grant a credit or loan as they consider the client s solvency to be insufficient based on the consultation of the files referred to in paragraph 2 of section 2.a), the creditor shall inform the client of the result of said consultation. 6. The evaluation of the solvency set out in this Article shall be performed without prejudice to the freedom to contract which, in its substantive aspects and with the limitations which may derive from other legal regulations, must preside over the relations between the credit institutions and the clients and, under no circumstances, shall affect their full validity and effect, or imply the transfer to the institutions of the responsibility for the clients non compliance of the obligations. Article 19. Scope of Application. CHAPTER II Regulations on Mortgage Credits and Loans Section 1. General Regulations 1. This chapter shall be applicable to the mortgage credit and loan banking services, hereinafter loans, signed with a client, individual, in which the mortgage is over a home or whose purpose is to acquire or conserve property rights over land or constructed buildings or those to be constructed. 2. Presumed to be subject to this Order are the loans granted with mortgage guarantee on homes situated in Spanish territory to individuals resident in Spain. 3. The credit institutions which grant loans to construction companies or real estate developers, when the construction company or developer plans a subsequent subrogation of the home purchasers in the loan, must include amongst the terms of its contractual relationship the obligation on the construction companies and developers to give the clients the personalised information relating to the service offered by the institutions under the terms set out in this Order. 4. The Bank of Spain can adapt the information requirements contained in this Chapter to apply them to other types of loans other than those set out in section 1 and not included either in the Consumer Credit Contracts Act 16/2011, of 24 June. 13

14 14 Article 20. Mortgage Loan Access Guide. Section 2 Pre contractual Information 1. The Bank of Spain shall prepare a «Mortgage Loan Access Guide», so that those who require mortgage loan banking services have, before formalising them, adequate information in order to adopt their financial decisions. 2. The guide shall be available at all of the commercial premises of the credit institutions, on their electronic pages and on the electronic page of the Bank of Spain, and must be duly available to the clients at all times and free of charge. Article 21. Pre contractual Information Sheet. 1. The credit institutions must provide the clients who request any of these services, with clear and sufficient information on the loans that they offer. This information, which shall be free and for guidance purposes, shall be provided in the Pre contractual Information Sheet (FIPRE in Spanish) which appears in appendix I. 2. The Pre contractual Information Sheet shall be available to the loans clients, free of charge, through all of the marketing channels used by the entity. Article 22. Personalised Information Sheet. 1. After the client has provided the information which is required on its finance requirements, its financial situation and its preferences, the credit institutions shall provide it with the personalised information which is necessary in order to respond to its credit demand, so that it can compare the loans available on the market, evaluate their implications and adopt a reasoned decision on whether to sign the contract or not. This information shall be provided through the Personalised Information Sheet (FIPER in Spanish) which appears in appendix II. 2. The Personalised Information Sheet shall be delivered to all of the loans clients, free of charge, sufficiently in advance and in any event before the client becomes bound by any contract or offer. 3. All additional information which the entity provides to the client shall appear in a separate document, which must be attached to the Personalised Information Sheet. Article 23. Binding Offer. 1. Once the client and the entity have shown their intention to contract a certain mortgage loan banking service, the property has been duly valued and the appropriate checks have been made of the registry situation and on the client s financial capacity according to the provisions of Article 18, the client can request that the institution provides a binding offer. 2. The binding offer shall be provided via a Personalised Information Sheet like that which appears in Appendix II, which also specifies the following: a) That it is a binding offer. b) The valid period of said offer. 14

15 15 3. Any additional information which the institution provides to the client in the binding offer shall appear in a separate document which must be attached to the Personalised Information Sheet. 4. If the binding offer is made at the same time as the Personalised Information Sheet is delivered and fully coincides with its content, the client can be provided with a single document. 5. Except in extraordinary circumstances or circumstances which are not attributable to the entity, the binding offer shall have a valid term of not less than fourteen calendar days from its delivery date. Article 24. Additional information on interest rate risk hedging instruments. 1. In relation to any interest rate hedging system which is marketed linked to a loan granted by the institution and in particular those which are referred to in the obligation established for the credit institutions in Article 19.2 of Act 36/2003, of 11 November, on economic reform measures, the client shall be informed about: a) The nature of the hedging instrument, whether it is an upper limit on the interest rate, or whether it is another type of hedging instrument whether because the upper limit is accompanied by a lower limit, or due to any other characteristic, in which case it shall be expressly stated that the product is not limited to protecting the client against interest rises. b) Its duration and, if appropriate, the conditions for its extension or renewal. c) Depending on the nature of the instrument, if applicable: 1 st. The obligation to pay the premium, and its amount; 2 nd. The potential regular liquidations of the hedging instrument, product or system, taking into account different interest rate scenarios which respond to the historic evolution of the reference rate, stressing the possibility that they may be negative; 3 rd. The calculation method of the cost associated to early cancellation, with reference to the different interest rate scenarios which respond to the historic evolution of the reference rate. b) And other characteristics of the hedging instrument, product or system which may be established by the Bank of Spain. 2. The information referred to in the previous section shall be contained in an appendix to the Personalised Information Sheet. 3. For the purposes of applying the provisions of this Article, it shall not be necessary that in the contracting of the hedging system there is an express and formal link with the loan, with it being sufficient that the parties expressly recognise in said contract that the hedging system is contracted with that purpose in relation to it. Said purpose cannot under any circumstances be observed when the notional amount of the hedge exceeds that of the loan that it intends to cover. On the other hand, it will be possible to observe it even when the term of the hedging system in longer than the term of the loan, provided that it is renewable and the failure to renew leads to the cancellation of the hedging system at no cost to the client. 15

16 16 Article 25. Additional information about floor and ceiling clauses. In the case of loans which have established limits on the interest rate variations, like floor and ceiling clauses, an appendix will be added to the Personalised Information Sheet, including the minimum and maximum interest rate to apply and the maximum and minimum repayment instalment. Article 26. Variable interest rates. Section 3 Interest rates 1. In the case of loans granted at variable interest rates, the credit institutions can only use as reference indexes or rates those which meet the following conditions: a) That they have been calculated at market cost and are not under the influence of the institution by virtue of consciously parallel agreements or practices with other institutions. b) And that the data used as the basis for the index or rate is aggregated in accordance with an objective mathematical procedure. 2. In the case of loans granted at a variable interest rate, a separate document shall be attached to the Personalised Information Sheet referred to in Article 22, containing a special reference to the periodic instalments to be paid by the client in different interest rate evolution scenarios. For these purposes, at least three repayment instalments shall be presented, calculated by using the maximum, average and minimum levels which the reference rates have had over the last fifteen years or the maximum available period if it is less. Article 27. Official interest rates. 1. In order to be applied by the credit institutions, under the terms of this Ministerial Order, the following official interest rates shall be published monthly: a) The average rate of the mortgage loans over three years for the acquisition of free housing, granted by credit institutions in Spain. b) The average rate of the mortgage loans between one and five years for the acquisition of free housing, granted by credit institutions in the Euro Zone. c) Internal rate of return on the secondary market of the public debt in a period between two and six years. d) Interbank reference at one year (Euribor). e) Interest Rate Swap (IRS) in the term of five years. f) The Mibor, exclusively for the mortgage loans formalised before 1 January 2000 according to the provisions of Article 32 of Act 46/1998, of 17 December, on the introduction of the euro. 2. The rates shall be published monthly in the «Boletín Oficial del Estado» (Official State Gazette) and shall also be available on the electronic page of the Bank of Spain. 16

17 17 3. The calculation method of the above rates shall be determined through a Bank of Spain circular. Article 28. Reference indexes and rates applicable in order to calculate the market value in the compensation for interest rate risk. 1. In order to calculate the market value of the mortgage loans and the resulting compensation for interest rate risk as referred to in Article 9.2 of Act 41/2007, of 7 December, which modifies the Mortgage Market Regulation Act 2/1981, of 25 March, and other regulations of the mortgage and financial system, regulating reverse mortgages and dependency insurance and which establishes certain tax regulations, reference indexes or interest rates shall be considered the Interest Rate Swap (IRS) rates at terms of 2, 3, 4, 5, 7, 10, 15, 20 and 30 years which are published by the Bank of Spain and to which a differential will be added. This differential shall be established taking into account those most commonly applied for the mortgage loans for home acquisitions in Spain at different repayment periods. 2. The reference interest rate from the above shall be applied which is closest to the term of the mortgage loan which remains from the early cancellation until the next revision date of the interest rate. 3. The calculation method of the above rates shall be determined through Bank of Spain circular. Article 29. Contractual documentation. Section 4 Contractual document and execution act The contractual documents and public deeds in which the loans are formalised shall contain, duly separated from the rest, financial clauses with at least the personalised information set out in the Personalised Information Sheet. The other clauses of such contractual documents cannot, in the client s prejudice, alter their content. In particular, with the specific features set out in the following sections, the applicable interest rate shall be established, as well as the obligation to notify the client of variations to that interest rate. Article 30. Execution act. 1. As regards the choice of notary public, it shall be as set out in the Notarial Regulations passed by Decree of 2 June 1944 and other applicable regulations. 2. The client shall be entitled to examine the draft public deed for the formalisation of the mortgage loan at the notary office at least during the three working days prior to its execution. The client can expressly renounce, before the authorising notary public, the indicated term provided that the execution act of the public deed takes place at the notary s office. 3. As civil servants and due to their generic duty to control the legality of the acts and business that they authorise, the notaries shall refuse to authorise the loan when it does not meet the requirements of this Order and the current law. Furthermore, the notary publics shall inform the client of the value and scope of the obligations that it assumes and must under all circumstances: a) Check if the client has adequately received and with sufficient notice the Personalised Information Sheet and, if applicable, if there are discrepancies between the conditions in the binding offer and the contractual document finally signed, and to inform the client of both the obligation of the entity to make available to 17