By adopting this Act, the Belgian legislator finally transposed the Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property into Belgian law.
The Act of 22 April 2016 amending and introducing provisions on consumer credit and mortgage credit in several books of the Code of Economic Law (hereinafter the “Mortgage Credit Act” or the “Act”) has been adopted and was recently published on 4 May 2016 in the Belgian Official Gazette.
By adopting this Act, the Belgian legislator finally transposed the Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (hereinafter the “Mortgage Credit Directive”) into Belgian law.
One of the main purposes of the Mortgage Credit Act is to enhance consumer’s protection and awareness when entering into a mortgage credit, as laid down in the Mortgage Credit Directive. The Belgian legislator opted for a harmonization going beyond the Mortgage Credit Directive. Hence, the legislator redesigned the legal framework applicable to the mortgage credit, replacing the current provisions applicable to the mortgage credit in the Code of Economic Law by a new chapter inspired by both the Mortgage Credit Directive and the current regime applicable to consumer credits.
In order to align both consumer and mortgage credit legislations, the Mortgage Credit Act provides for certain amendments of the provisions on consumer credits.
This section provides an overview of significant changes with respect to mortgage credits as inserted in the Code of Economic Law by the Mortgage Credit Act:
1. Extension of the definition of mortgage credit
The definition of mortgage credit has been amended substantially, extending the scope of application of the mortgage credit rules to former consumer credits.
Under the previous legislation, a mortgage credit was defined as a credit with an immovable purpose (financing of the acquisition or preservation of immovable property rights) and secured by either a mortgage or another comparable security right related to immovable property. Immovable purpose and mortgage or security right related to immovable property if cumulative conditions were met in order to qualify as a mortgage credit.
The new Mortgage Credit Act introduces a definition of the mortgage security which goes beyond the notion of a mere mortgage. This means a mortgage security could be, amongst others, a mortgage, a security right related to immovable property, a mandate, or the right of subrogation of one or more third parties to the rights of a privileged creditor who has a security right on immovable property.
The Mortgage Credit Act further amends the former definition of mortgage credit by introducing two major changes.
Firstly, the Mortgage Credit Act introduces a new distinction based on the purpose of the credit. As of now, a mortgage credit can be a credit secured by a mortgage security with either a movable or an immovable purpose.
Moreover, credits with an immovable purpose are no longer required to be secured by a mortgage or another comparable security right related to immovable property in order to fall under the scope of application of a mortgage credit. The mere immovable purpose is enough to qualify as a mortgage credit. Nevertheless an exception is foreseen for the renovation of an immovable property.
In view of the enlarged scope of application, some credits which formerly qualified as consumer credits will, from now on, qualify as mortgage credits and therefore be subject to the Act.
In their daily practice creditors will now have to accurately identify the purpose of the credit in order to offer the appropriate credit to the consumer.
2. Pre-contractual information
Still aimed at the enhancement of consumers’ protection, the new Act further increases the pre-contractual information duties of the Creditor.
According to the Mortgage Credit Act, the credit application form must contain additional provisions in relation to, amongst others, the purpose of the credit, information regarding the revenues of the borrower, its dependents, and existing financial commitments. This should further enable the creditor to fulfil their duty to investigate the creditworthiness of the consumer and as the case may be of the personal security provider. The creditor must keep the credit application form until complete reimbursement of the credit. He will also ensure that the assessment of the consumer’s creditworthiness is well documented and that adequate procedures are implemented.
Furthermore, the creditor has the obligation to provide the consumer with personalized information enabling the consumer to compare the credits available on the market, assess their implications, and make an informed decision on whether to conclude a credit agreement. This information shall be provided by means of the European standardized information sheet (ESIS) of which a template as well as instructions for completing the form are provided as Annex to the Mortgage Credit Act. For mortgage credits with a movable purpose, the SECCI will replace the ESIS, as used for the consumer credits.
The creditor also needs to advise and give adequate explanations by taking into consideration the financial situation and needs of the consumer in order to propose the most suitable credit for the consumer.
3. General rules of conduct
The Mortgage Credit Act also introduces a number of rules of conduct to be taken into account by the creditor and the credit intermediary towards the consumer during the entire credit process. They relate to advertising and marketing, pre-contractual information, conclusion of the credit contract, assessment of the creditworthiness and remuneration policies, amongst others.
The Act expressly states that as a general rule creditors and intermediaries should act honestly, fairly, transparently, and professionally, taking into account the rights and interests of the consumers.
4. Contractual information
The Mortgage Credit Act enumerates mandatory provisions, which have to be included in the credit agreement. The list of mandatory provisions is mainly inspired by the existing enumeration for consumer credits.
The credit agreement must stipulate the calculation of the annual percentage rate of charge (APRC). The calculation of the APRC, which is subject to a maximum harmonization under the Mortgage Credit Directive, will be further detailed in a Royal Decree soon to be adopted.
5. Ancillary services
Tying practices, which mean the offering or the selling of a credit agreement in a package with other distinct financial products or services were the credit agreement is not made available to the consumer separately, are explicitly prohibited by the Mortgage Credit Act.
Although, bundling practices are authorized under certain conditions. Unlike the tying practice, the bundling practices make separately available the credit agreement to the consumer, but not necessarily on the same terms or conditions as when offered bundled with the ancillary services.
In case of non-execution of the credit agreement, the creditor may only claim the payment of limited amounts which are exhaustively listed by the Mortgage Credit Act.
Additionally, the credit agreement can only be terminated by the creditor in a limited number of termination events foreseen by the Mortgage Credit Act. Even the termination of the agreement by the judge to the prejudice of the consumer can only be decided in limitative circumstances.
7. Entry into force of the Mortgage Credit Act and transitional provisions
The Mortgage Credit Act shall enter into force on 1 December 2016 and will apply to all credits agreements for which an application has been made as of 1 December 2016.
Notwithstanding the foregoing, the Act will also apply to agreements for which an application has been made before 1 December 2016 if they are concluded as from 1 March 2017.
Moreover, some specific provisions will be applicable as of 1 March 2017 to ongoing credit agreements concluded before 1 December 2016. These relate to the interests and costs that the creditor may claim in case of default, which will require the creditor to take into account some provisions of the Act when enforcing the above mentioned credit agreements.
Before 4 May 2019, the creditors will have to submit their credit agreements templates to the FPS Economy and make their ongoing credit agreements for an indefinite duration and personal security agreements compliant with the provisions of the Mortgage Credit Act.
The implementation of the Mortgage Credit Act, in particular the extension of the definition of the mortgage credit, will have a strong impact on creditors’ current practices.
Creditors will have to amend their credit documentation and submit it for approval to the FPS Economy as well as to amend their procedures in order to comply with the new Mortgage Credit Act.
While moving towards increasing transparency, which is expected to be to the benefit of the consumers, the Mortgage Credit Act brings along a strengthening of creditors’ liability and duties, creating thereby an alignment of the rules for consumer credit providers and mortgage credit providers.
You can find the complete text of the Mortgage Credit Act by clicking on the following link.
 Directive 2014/17/EU of the European Parliament and of the Council 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, OJ L 60, 28 February 2014.