The Commission shall also determine the method for the calculation of the APR.
Loans provided under an arrangement concluded before 21 March 2016 shall be governed by the rules in force. Companies already operating in the first fee markets should be able to make the switchover reasonably smooth. This is not the case for companies that have no previous batch marketing expertise.
Creditors will be able to take over the new scheme from September, but must do so by 21 March next year. Where they have not yet done so, these companies should begin to make their preparations for the'transition' from the current scheme to the new MCD scheme.
Mortgage loans subject to new legislation
The Act transposing Directive 2014/17/EC on consumer credit contracts for housing (the "Mortgage Credit Act") comes into effect on 14 July 2016. Under the Mortgage Credit Act, the Dutch Financial Supervision Act (Wet op het financieel toözicht, 'DFSA') and the Dutch Civil Code (Burgerlijk Wetboek, 'DCC') are amended.
Under the Mortgage Credit Act, mortgage brokers are subject to approval and are required to fit. Mortgage Credit Act is confined to mortgage loans provided to the consumer. Mortgage loans are not possible. Netherlands lawmakers have opted to transpose the Mortgage Credit Directive by changing the DFSA (and other regulations) and the draft CCC.
Statutory regulations of the Mortgage Credit Directive are transposed in the German Financial Supervisory Authority (DFSA). Prior to the transposition of the Mortgage Credit Directive, Netherlands legislation was already largely in line with these statutory requirements. However, the most important new regulations in the German Mortgage Credit Association (DFSA) relate to the fit regulation for mortgage credit brokers (see section 7).
A new part of the draft Mortgage Credit Directive, Part 7.2B, implements the civil legislation requirements of the Mortgage Credit Directive. The new part contains regulations on: publicity; pre-contractual information; ban on pegging; calculate the APR; the consumer's right to transform non-euro credit contracts into euro credit contracts; the requirement to ask the user to come and talk to him if he is in default; and the requirement to wait two month before execution/foreclosure.
Mortgage Credit Act will amend the present procedure of applying for a mortgage in the Netherlands. Usually, a mortgage is offered to the customer on the suspensive basis that the customer submits certain documentation, such as a pay statement, a real estate appraisal statement and a credit check.
Consumers sign the mortgage proposal and send it to the mortgage lender, whereupon the credit contract becomes valid upon fulfillment of the suspensive terms. Under the Mortgage Credit Act, the credit contract becomes valid only if the customer receives an unconditional bid for at least fourteen workingdays.
According to the explanations on the Mortgage Credit Act, there is no firm bid if an order is made subject to a suspensive clause which may have negative consequences for the consumer. A cooling-off period of fourteen workingdays after fulfilment of the suspensive clause) must be integrated into the mortgage credit request procedure.
The mortgage lender will in fact make a provisional proposal to the customer, including the amount of the mortgage and the interest on it. Where the suspensive condition is fulfilled later, the end-user receives a definitive tender lasting fourteen working days. Mortgage credit becomes active the instant the consumer confirms that he wants to take out the mortgage.
Based on the Dutch Code of Conduct for Mortgage Loans (Gedragscode Hypothecaire Financieringen), the lender or credit broker provides the European standard information sheet ("ESIS") together with the mortgage offering to the customer. The Mortgage Credit Act will provide a legislative base for the provision of ESIS to consumers and provide detail guidance on the contents of ESIS.
Under the Mortgage Credit Act, changes to the ESIS are prohibited. Effects on actual practices are as follows: ESIS can no longer be included in the mortgage offering; some mortgage brokers have written their general business policy in Dutch. Despite the legislator's aim to enhance the clearness of the ESIS, the ESIS terminology is more complex than the fundamental Dutch used in the mortgage credit record.
Yearly interest rate is the aggregate amount of mortgage credit given, calculated as an annually calculated percent of the aggregate amount of mortgage credit. Mortgage loan charges include interest, the charge for a rating review and the charge for taking out a policy. At present, the APR based on the Dutch Code of Conduct for Mortgage Loans is usually part of the mortgage offering.
After the Mortgage Credit Act comes into effect, the annual percentage rate of charge must be incorporated into the ESIS. Harmonised annual percentage rate of charge calculations should allow users to make comparisons between mortgage credit products offered by different EU mortgage lenders. Therefore, mortgage credit institutions may not deviate from the required methodology for computing the annual percentage rate of charge.
The Mortgage Credit Directive provides for maximal harmonisation both in this regard and in relation to the ESIS. Mortgage Credit Act shall apply to mortgage credits concluded on or after the effective date of the Mortgage Credit Act. For mortgage credits concluded before this date, the "old" regulations continue to apply.
In the explanatory memorandum, it is stated that the Mortgage Credit Act does not cover interest rate checks or changes to mortgage credits (which does not involve extra credit to an eligible customer) if the mortgage credit transaction was concluded before the Mortgage Credit Act came into being.
Under the Mortgage Credit Act there are no explicitly applicable transition regulations for mortgages. In view of the temporary arrangements for mortgage lending, it is reasonable to assume that the new arrangements only cover mortgage products submitted on or after the Mortgage Credit Act comes into effect.
Prior to the Mortgage Credit Act's coming into effect, political entities that had taken out a mortgage or credit for consumers in the Netherlands were already obliged to obtain a mortgage credit certificate. When the Mortgage Credit Act comes into effect, there will be a licensing requirement for mortgage credit brokers throughout the EU.
An innovation in the Netherlands is the introduction of the single European passport for mortgage credit brokers wishing to provide their mortgage credit service across frontiers. Non-resident brokers must obtain a license in their home countries and can arrange mortgage loans in the Netherlands following a reporting process.
Mortgage brokers do not need a special Netherlands mortgage credit franchise in this case. Similarly, a mortgage credit broker in the Netherlands can obtain a single European passport on the grounds of his Netherlands authorisation and provide his service in another Member State. Lastly, it is important to bear in mind that the Mortgage Credit Act does not establish a compulsory licensing and a passport for lending.
Brokers may only broker mortgage loans provided by a provider who has obtained a Netherlands licence or, in the case of a non-Netherlands based institution, a valid EU citizenship.