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2000-02-09

CICR Deliberation of 9 February 2000 on Early Repayment of Mortgage Loans

The Interministerial Committee for Credit and Savings issued this regulation to enforce transparency requirements for the comprehensive compensation fee charged to borrowers upon the early repayment of mortgage loans. The decree mandates that loan contracts must explicitly state the calculation formula, provide illustrative examples based on specific principal amounts and time horizons, and prohibit any additional charges beyond the agreed fee. Furthermore, lenders are required to disclose the potential early repayment cost in periodic account statements, with the regulation entering into force 60 days after publication.

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Interministerial Committee for Credit and Savings

SECRETARIAT

DELIBERATION OF 9 FEBRUARY 2000

Mortgage credit: Regulation on the early repayment of loans (Article 40, paragraph 1, of the Consolidated Banking Act, as amended by Article 6, paragraph 1, of Legislative Decree 342/99).

THE INTERMINISTERIAL COMMITTEE FOR CREDIT AND SAVINGS

HAVING REGARD TO Article 40, paragraph 1, of Legislative Decree No. 385 of 1 September 1993 (Consolidated Banking Act), as amended by Article 6, paragraph 1, of Legislative Decree No. 342 of 4 August 1999, which in the matter of mortgage credit:

a) recognizes the right of debtors to repay their debt in whole or in part in advance, paying the bank exclusively a comprehensive compensation fee for early repayment as contractually agreed;

b) provides that contracts must indicate the methods for calculating the compensation fee;

c) grants the CICR the power to determine the criteria for the aforementioned calculation, solely to guarantee the transparency of conditions;

HAVING REGARD TO Chapters I and III of Title VI of the Consolidated Banking Act, regarding the transparency of contractual conditions;

CONSIDERING that the determination of the compensation fee that debtors are required to pay in the event of early repayment is left to contractual autonomy;

NOTING the need for bank customers to be informed clearly and correctly regarding the cost to be incurred in the event of early repayment;

ON THE PROPOSAL made by the Bank of Italy;

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Interministerial Committee for Credit and Savings

SECRETARIAT

DELIBERATION

  1. Contracts must indicate the comprehensive compensation fee to be paid in the event of early repayment or partial repayment of mortgage credit financing, specifying the relevant calculation formula. Any financial indices potentially used in the formula must be obtainable from sources that are easily accessible. Contracts must also stipulate that no other charges may be levied.

  2. Contracts must report, also in an attachment, one or more examples of the application of the formula, considering an advanced repaid principal equal to one million lire, or one thousand euros, and at least two different hypotheses of remaining amortization time for the debt if the compensation varies in relation to said time. In the event that the formula refers to variable indices, the examples must take into consideration the least favorable value for the customer that such indices have recorded over the last three years.

  3. In periodic communications regarding the conduct of the relationship and, in any case, at least once a year, the comprehensive compensation fee that debtors would be required to pay to repay the financing in advance as of the date to which the communication refers must be indicated.

  4. This deliberation does not apply to contracts entered into before its entry into force.

  5. This deliberation, which will be published in the Official Gazette of the Italian Republic, enters into force 60 days after publication. The provisions concerning the periodic communication of the comprehensive compensation fee enter into force 180 days after the same publication.

Rome, 9 February 2000

THE PRESIDENT G. AMATO

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