Notice No. 2/2010

Avisos do Banco de Portugal Aviso do Banco de Portugal nº 2/2010

Instruction No. 27/2003 enshrined in the national legal order the most relevant procedures of Recommendation No. 2001/193/EC of the Commission of 1 March 2001, which sought to harmonize the information provided by credit institutions prior to the conclusion of housing credit contracts.

Notwithstanding the contribution of its provisions to increasing transparency in the conditions for accessing housing credit, it is now considered necessary to review the minimum information requirements that credit institutions must provide to customers, given the growing diversity and complexity of marketed credit products, the legislative changes introduced in the meantime, and the conclusions drawn from the supervision of the housing credit market that the Bank of Portugal has been developing in the performance of its behavioral supervision functions.

Through this Notice, the Bank of Portugal reinforces the information duties of credit institutions in the negotiation and conclusion of housing credit contracts and establishes information duties during the term of these contracts. Transparency, quality, and rigor of the information to be provided to banking customers are thus enhanced, and comparability between different financing alternatives is promoted. Instruction No. 27/2003 is repealed.

Under the rules set out in this Notice, credit institutions are obliged to make available to their customers a standardized information sheet at the moment of the housing credit simulation.

Subsequently, upon loan approval, credit institutions must deliver to customers, in addition to the respective standardized information sheet, a draft of the contract to be concluded.

A set of minimum elements regarding the financial conditions of the loan that must necessarily appear in the housing credit contract is also defined, and the duty to provide periodic information on the evolution of the loan during the term of the respective contract is established.

By virtue of the provisions of Decree-Law No. 192/2009 of 17 August, which extended the housing credit regime to so-called "connected credit contracts," credit institutions must also comply with the information duties provided for in this Notice in the context of the negotiation, conclusion, and duration of credit contracts where the mortgage guarantee falls, wholly or partially, on a property that simultaneously guarantees a housing credit granted by them.

Thus, in the exercise of the competence attributed to it by the provisions of Article 17 of its Organic Law, Article 76(1), and Articles 77(4) and (6) of the General Regime of Credit Institutions and Financial Companies, the Bank of Portugal determines:

Article 1. Object and scope of application

This Notice establishes minimum information duties to be observed by credit institutions with headquarters or branches in national territory in the negotiation, conclusion, and duration of housing credit, connected credit, and other mortgage credit contracts.

Text amended by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

Article 2. Definitions

For the purposes of this Notice, the following are understood:

a) "Housing credit": credit contracts for the acquisition, construction, and execution of works in permanent or secondary own housing or for letting, as well as for the acquisition of land for the construction of own housing;

b) "Connected credit": credit contracts secured by a mortgage that falls, wholly or partially, on a property that simultaneously guarantees a housing credit contract concluded with the same credit institution, as defined in Article 1(2) of Decree-Law No. 51/2007 of 7 March;

c) "Other mortgage credit": credit contracts, not covered by the preceding subparagraphs, secured by a mortgage on immovable property or by another right over immovable property, and concluded with natural persons acting for purposes unrelated to their commercial or professional activity, as defined in Article 1(3) of Decree-Law No. 51/2007 of 7 March;

Text amended by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

d) (New)

Drafting introduced by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

"Loan": any housing credit, connected credit, or other mortgage credit contract;

e) "Standard loan": a loan marketed on a regular basis, which constitutes, compared to alternative financing options, the simplest modality, with a variable interest rate indexed to Euribor, to which is added the base spread assigned to the customer, repaid from the outset in constant installments of capital and interest;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

f) "Loan approval": the credit institution's decision to proceed with the granting of the loan, following the analysis of the elements necessary for such granting, including the result of the property valuation;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

g) "Instruction": a complementary instrument to this Notice, to be issued by the Bank of Portugal;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

h) "Commissions": the monetary payments due from customers by credit institutions as remuneration for services provided by them or subcontracted to third parties, in the context of the negotiation, conclusion, and duration of loans;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

i) "Expenses": the other charges borne by credit institutions, which are due to them by third parties, and passed on to customers, namely payments to Land Registries, Notarial Offices, or those of a fiscal nature;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

j) "APR" (TAE): the annual percentage rate of charge, calculated in accordance with Decree-Law No. 220/94 of 23 August, covering, where applicable, all promotional conditions associated with the loan and the reduction of commissions and other costs of that loan resulting from optional cross-selling, as defined, respectively, in Article 3 and Article 9(2) of Decree-Law No. 51/2007 of 7 March, as well as other situations likely to affect the cost of the loan;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

k) "Revised APR" (TAER): the revised annual percentage rate of charge, calculated in accordance with the provisions of Decree-Law No. 220/94 of 23 August and Article 9 of Decree-Law No. 51/2007 of 7 March;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

l) "NIR" (TAN): the nominal annual interest rate;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

m) "Fixed interest rate": the interest rate determined by the credit institution for loans covered by the fixed rate regime;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

n) "Contracted fixed interest rate": the interest rate determined by the credit institution for loans covered by the fixed rate regime, resulting from the existence of optional cross-selling, promotional conditions, or other situations likely to affect the cost of the loan;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

o) "Base spread": the margin applied to the index, in a variable interest rate regime, or to the reference rate, in a fixed interest rate regime, if applicable, assigned to the customer after assessment of their credit risk and the guarantees offered for the fulfillment of the loan;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

p) "Contracted spread": the margin applied to the index, in a variable interest rate regime, or to the reference rate, in a fixed interest rate regime, if applicable, assigned to the customer resulting from the existence of optional cross-selling, promotional conditions, or other situations likely to affect the cost of the loan;

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

q) "Durable medium": any instrument that allows the customer to store information addressed personally to them, so that, in the future, they can have easy access to it for a period of time adequate to the purposes for which that information is intended and, likewise, reproduce it in full and unchanged.

Renumbered by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

Article 3. Duty of information

1 - Credit institutions must inform customers about the different elements characterizing the loans they market, as well as about the various charges to be borne by customers.

2 - The information to be provided by credit institutions in the context of the negotiation, conclusion, and duration of housing credit, connected credit, and other mortgage credit contracts must be complete, true, up-to-date, clear, objective, and presented in a legible manner.

Text amended by Notice No. 16/2012, published in the DR, II Series, Part E, No. 243, of 17-12-2012.

Article 4. Pre-contractual information

1 - With the simulation of the loan conditions, carried out at the counters of credit institutions, through their websites, or by any other means of communication, credit institutions must make available to customers the standardized information sheet prepared based on the information elements provided by them.

2 - Simultaneously with the communication of the loan approval, credit institutions must deliver to customers a standardized information sheet incorporating the conditions of the approved loan.

3 - Without prejudice to the provisions of other legal or regulatory norms in force, the information to be provided by credit institutions, in accordance with the preceding paragraphs, must include, in particular:

a) NIR (TAN);

b) APR (TAE);

c) Revised APR (TAER), if applicable;

d) Description of the loan characteristics;

e) Loan costs; and

f) Financial plans of the loan for the nominal interest rate on the date of simulation or approval, for the nominal interest rate increased by one and two percentage points, and for the standard loan.

4 - The Bank of Portugal fixes, by Instruction, the model and the information to be provided through the standardized information sheet referred to in the preceding paragraphs of this article.

5 - The provisions of this article do not preclude the possibility for institutions to provide their customers with additional information elements regarding the loan conditions, notably through the provision of a standardized information sheet at a time prior to the approval of that loan, which must respect the model to be defined in an Instruction.

Article 5. Delivery of contract draft

1 - Without prejudice to the compliance with other legal obligations and the provisions of Article 4(2) of this Notice, with the communication of the loan approval, credit institutions must also deliver to customers the draft of the contract to be concluded.

2 - The contract draft referred to in the preceding paragraph must contain the elements indicated in Article 6 of this Notice and reflect the conditions of the loan described in the respective standardized information sheet.

Article 6. Information to be provided in the contract

Without prejudice to the provisions of the law, the loan contract must specify the following elements:

a) Loan amount;

b) Purpose of the loan;

c) Applicable interest rate regime;

d) Indication of the NIR (TAN), its components, and method of calculation, including the fixed interest rate, the contracted fixed interest rate, the base spread, and the contracted spread, if applicable;

e) Indication of the APR (TAE);

f) Description of promotional conditions, if applicable;

g) Indication of the Revised APR (TAER), if applicable;

h) Identification of the financial products and services acquired by the customer, optionally, in association with the loan, description of the effects of that acquisition on the loan costs, and specification of the conditions for maintaining and eventual revision of those effects, if applicable;

i) Other situations likely to affect the cost of the loan and specification of the respective conditions for application, maintenance, and possibility of revision, if applicable;

j) Loan repayment conditions:

i) Repayment modality;

ii) Installment regime;

iii) Loan term;

iv) Number and periodicity of installments;

v) Amount of installments to remain in force until the first interest rate revision, whenever determinable, and without prejudice to, in the case of a housing credit contract framed within the subsidized credit regime, that amount depending on subsequent confirmation by the competent entity; and

vi) Due date of installments;

k) Identification of the loan guarantees;

l) Identification and quantification of the commissions applicable to the loan on the date of contract conclusion and under what conditions these may be revised in the future; and

m) Identification of the charges applicable in case of default, as well as the conditions under which the same may be revised in the future.

Article 7. Information to be provided during the term of the contract

1 - During the term of the contract, credit institutions must make available to customers a monthly statement, which must include, at least, the following elements:

a) Identification of the loan and the amount of capital outstanding on the date of issuance of the statement;

b) Number and due date of the installment subsequent to the date of issuance of the statement;

c) Amount of the installment subsequent to the date of issuance of the statement, with disaggregation of its respective capital and interest components;

d) NIR (TAN) applicable to the installment subsequent to the date of issuance of the statement, with identification of its components;

e) Indication of the interest rate discount tier and amount applicable to the installment subsequent to the date of issuance of the statement, in the case of a housing credit contract framed within the subsidized credit regime;

f) Identification and amount of any commissions and expenses to be paid by the customer on the due date of the installment subsequent to the date of issuance of the statement;

g) Total amount to be paid by the customer on the due date of the installment subsequent to the date of issuance of the statement, resulting from the provisions of subparagraphs c), e), and f) of this paragraph;

2 - Without prejudice to the provisions of the preceding paragraph, when the monthly statement is not sent with a minimum advance of 15 (fifteen) days relative to the due date of the subsequent installment, institutions must, in case of alteration of the loan interest rate in accordance with contractual provisions, communicate to customers, with a minimum advance of 15 (fifteen) days relative to the due date of the subsequent installment subject to that alteration, the following elements:

a) Number, due date, and amount of the installment subsequent to that alteration; and

b) NIR (TAN) applicable to the subsequent installment, with identification of its components.

3 - Whenever, in accordance with the contract, the credit institution is granted the right to modify by its own initiative the contractual conditions with a reflection on the installment value, which do not result from changes in the interest rate in accordance with contractual provisions, it must communicate to customers the content of those alterations, with a minimum advance of 30 (thirty) days relative to the intended date for their application, without prejudice to other periods fixed by law or regulation.

4 - The information referred to in the preceding paragraph must be provided, whenever possible, through the monthly statement referred to in paragraph 1 of this article.

5 - In the case of communications regarding the breach of contractual obligations, credit institutions must inform the customer about the installments or other values outstanding on the date of issuance of that information, as well as the amounts due by way of default interest, with identification of the respective rate and basis of calculation.

Article 8. Compliance with information duties

1 - Credit institutions may comply with the information duties provided for in this Notice by providing information on paper or on another durable medium, except if the customer requests, in an express manner, the provision of information on paper.

2 - In the case of loans existing on the date of entry into force of this Notice, the information provided for in Article 7 must be provided to the customer through the medium and means of communication contractually agreed upon, or, in the absence of contractual provision, through the medium and means usually used, unless the customer authorizes, in an express manner, the alteration of the medium and means of communication to be used for that purpose.

3 - It is incumbent upon credit institutions to prove the provision to customers of the information provided for in Article 3, Article 4(2), and Articles 5, 6, and 7 of this Notice.

Article 9. Sanctioning regime

The violation of the provisions of this Notice is punishable in accordance with the General Regime of Credit Institutions and Financial Companies.

Article 10. Repealing clause

Instruction No. 27/2003, published in the Official Bulletin of the Bank of Portugal of 17 November 2003, is repealed.

Article 11. Temporal application

1 - The provisions of this Notice apply to loans to be concluded after its entry into force.

2 - For loans already concluded on the date of entry into force of this Notice, the provisions of Article 3(2) and Articles 7 to 9 of this Notice apply.

Article 12. Entry into force

This Notice enters into force on 1 November 2010.

Lisbon, 30 March 2010. - The Governor, Dr. Vítor Constâncio.