New legislation on consumer credit agreements

Law 16/2011 of 24 June 2011 (BOE of 25 June 2011) on credit agreements for consumers
wrote into Spanish law Directive 2008/48/EC of the European Parliament and of the Council
of 23 April 2008 on credit agreements for consumers and repealed Law 7/1995 of 23
March 1995 on consumer credit.
Like the previous law, this Law applies to those contracts whereby a creditor grants or
promises to grant to a consumer credit in the form of a deferred payment, loan, credit line
or other similar financial accommodation. The term “consumer” means a natural person
who is acting for purposes which are outside his trade, business or profession.
The following contracts, inter alia, are excluded from the scope of this Law: a) credit agreements
which are secured by a real estate mortgage; b) credit agreements the purpose of
which is to acquire or retain property rights in land or in an existing or projected building; c)
credit agreements involving a total amount of credit less than €200 (previously €150); d)
hiring or leasing agreements where an obligation to purchase the object of the agreement
is not laid down either by the agreement itself or by any separate agreement; e) credit
agreements in the form of an overdraft facility and where the credit has to be repaid within
one month; f) credit agreements where the credit is granted free of interest and without any
other charges and credit agreements under the terms of which the credit has to be repaid
within three months and only insignificant charges are payable (1% of the total credit
amount); and g) credit agreements where the credit is granted by an employer to his employees
as a secondary activity free of interest or at annual percentage rates of charge
lower than those prevailing on the market.34 However, the partial application of the Law to
credit agreements of total amount exceeding €75,000 (previously €18,030) remains in place.
In order to improve consumer information, the Law addresses what takes place before the
consumer concludes a credit agreement. Specifically, it regulates in detail the basic information
to be included in advertising, in business communications and in the announcements
of offers displayed in commercial premises proposing either a credit or the services
of an intermediary to conclude a credit agreement.
Also set forth is a list of the credit features about which the creditor and, if applicable, the
credit intermediary must inform the consumer before he is bound by any credit agreement
or offer. Such information shall be provided by means of the Standard European Consumer
Credit Information form set out in the annexes to this Law.
Creditors and, if applicable, intermediaries must help the consumer to decide which credit
agreement, within the range of products proposed, is the most appropriate for his needs
and financial situation. This assistance specifically entails an obligation to explain to the
consumer in a personalised manner the characteristics of the products proposed and the
related pre-contractual information and to warn him of the risks attaching to default on
payment and to over-indebtedness. so that he can understand the effects which they may
have on his economic situation.
If the obtainment of credit on the terms and conditions offered is linked by the creditor to
the conclusion of a contract for ancillary services, in particular insurance, the creditor must
inform the consumer of this circumstance and of its cost, and also of the terms and conditions
which would otherwise be applied to the credit agreement should the contract for
ancillary services, in particular insurance, not be concluded.
The creditor must assess the consumer’s creditworthiness prior to the conclusion of the
credit agreement, for which purpose it may use information obtained from its own sources
and that furnished by the consumer, including the consultation of certain databases.35
Although this assessment is compulsory, its scope is left to the discretion of the creditor
depending on the commercial relationship between it and its customer. The assessment
of consumer creditworthiness by credit institutions shall also take account of specific
risk management and internal control rules applicable to them under the related specific
legislation.