Adoption of the law on credit agreements for consumers relating to residential immovable property

Today, the Parliament has voted on the Law on credit agreements for consumers relating to residential immovable property. This law provides for a common framework regarding consumer credits secured by a mortgage or otherwise relating to residential immoveable property and mainly intends to strengthen consumer protection. It also requires that credit intermediaries obtain authorisation in order to carry out their activity.

This law implements Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010.

The main topics covered by the Law are as follows:

• Pre-contractual information obligation for credit professionals;
• Obligation to provide consumers with personalised information in a standardised format (ESIS);
• Obligation to assess the creditworthiness of the consumer;
• Introduction of mandatory provisions regarding the early repayment of credits relating to residential immovable property;
• Regulation of the activity of credit intermediaries; and
• Introduction of a harmonised calculation method of the annual percentage rate of charge (APRC).

The provisions of this law will be inserted as a new Chapter 6 in the Luxembourg Consumer Code. This law expressly states that it shall not apply to credit contracts concluded before 21 March 2016. Hence it shall apply to all credit contracts which have been concluded since 21 March 2016. Credit intermediaries are granted a deadline until 21 March 2017 to obtain authorisation as credit intermediaries in accordance with this law. 

For further information on the impact of this law, please contact André Hoffmann, Partner or Michel Nickels, Senior associate.