Regulatory Alerts2020-03-31
Added · Updated
Instruction No. 7/2020 on Maximum Rates for Consumer Credit Contracts in Q2 2020
The Bank of Portugal establishes maximum effective annual rates (TAEG) and maximum nominal rates (TAN) for consumer credit contracts concluded in the second quarter of 2020. These limits apply to specific categories including personal credit, education and health financing, vehicle loans, financial leasing, credit cards, and overdrafts, with maximum TAEGs ranging from 4.3% to 15.8% and a maximum TAN of 15.8% for credit overdrafts. The instruction mandates compliance with these caps for contracts signed between April 1 and June 30, 2020, without altering the freedom to negotiate other financing conditions.
Instruction No. 7/2020 BO No. 3/2020 2nd Supplement • 2020/03/31 .................................................................................................................................................................................................. Topics Supervision :: Behavioral Supervision Mod. 99999940/T – 01/14 Index Text of the Instruction Text of the Instruction Subject: Disclosure of maximum rates applicable to consumer credit contracts in the 2nd quarter of 2020
Decree-Law No. 133/2009, of June 2, which transposed into the internal legal order Directive No. 2008/48/EC, of April 23, on consumer credit contracts, established the regime of maximum rates applicable to these contracts.
According to Article 28 of Decree-Law No. 133/2009, as amended by Decree-Law No. 42-A/2013, of March 28, the maximum rates for each type of credit are determined based on the Average Annual Effective Global Rates (TAEG) practiced in the market by credit institutions in the previous quarter, plus one quarter. Additionally, the maximum rate of any type of credit may not exceed the average TAEG of the entire consumer credit market, plus 50%. Applying the criterion defined by law, the Bank of Portugal quarterly discloses the maximum rates for the different types of credit, for application to contracts to be signed in the following quarter.
The rates defined in this Instruction constitute maximum limits on the charges that can be contracted for each type of credit contract and may in no case be referred to as "legal rates". The freedom to contract financing conditions remains, with the sole exception of compliance with these limits.
Thus, in the exercise of the competence attributed to it by Article 17 of its Organic Law and by Article 28 of Decree-Law No. 133/2009, of June 2, in its current wording, the Bank of Portugal determines the following:
- Consumer credit contracts, concluded under Decree-Law No. 133/2009, of June 2, must observe the maximum rate regime defined in Article 28.
Instruction No. 7/2020 BO No. 3/2020 2nd Supplement • 2020/03/31 Topics Supervision :: Behavioral Supervision .................................................................................................................................................................................................. Mod. 99999940/T – 01/14
- In the 2nd quarter of 2020, the maximum rates set out in the tables below apply to each type of credit contract:
2nd quarter of 2020 Maximum TAEG Personal Credit Purpose Education, Health, Renewable Energies and Financial Leasing of Equipment 6.8% Other Personal Credits (without specific financing, home, consolidated and other purposes) 13.1% Auto Credit Financial Leasing or ALD: new 4.3% Financial Leasing or ALD: used 5.7% With reservation of ownership and others: new 9.6% With reservation of ownership and others: used 12.2% Credit Cards, Credit Lines, Bank Current Accounts and Overdraft Facilities 15.8%
2nd quarter of 2020 Maximum TAN Credit Overdrafts 15.8%
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The types of credit contracts listed in the tables above correspond to the credit categories defined in Instruction No. 14/2013, except for credit overdrafts which are defined in Decree-Law No. 133/2009.
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This Instruction enters into force on April 1, 2020.