Bill improves protection of consumers with mortgages

Zagreb - The government on Thursday forwarded to parliament a mortgage bill aligned with European Union acquis communautaire which brings better consumer protection and tightens up creditors' obligations in informing consumers and introducing other benefits.

Finance Minister Zdravko Marić explained that the bill is aimed at better protecting consumers. The bill regulates the obligation of creditors to give consumers a period of at least 15 days to compare the terms and effects of the mortgage being offered and make an informed decision. Consumers will have a period of 14 days from the signing of a mortgage contract to withdraw from the contract without being obliged to provide a reason for their decision. 

Banks will be obliged to advise clients with mortgages pegged to a foreign currency every time the difference in their repayment rate varies more than 20% due to exchange rate trends. Furthermore, the credit institution is obliged, once during the duration of the mortgage, if the client so requests, to unconditionally convert loans pegged to a foreign currency and without any additional charges.

The bill introduces a standardised form aimed at providing harmonised information prior to a mortgage loan being concluded. The bill also proposes that the effective interest rate be calculated at the European Union level and defines a mathematical formula for that purpose. Furthermore, in line with EU legislation, the bill obliges credit institutions to undertake reasonable and justified measures in an effort to come to an agreement concerning repayment of arrears prior to instituting distress proceedings.

The bill also provides a "walk away" clause in cases when a mortgage cannot be repaid and ownership rights are transferred to the credit institution, in which case all liabilities pertaining to the mortgage shall be considered as being fulfilled. The law is expected to enter into force on 1 July and will apply to mortgages taken after that. (Hina)

Autor: Hina