Order on Good Practice for Mortgage Credit

Order on Good Practice for Mortgage Credit1)

Pursuant to Section 43, paragraphs 2, 3, and 8, and Section 373, paragraph 4, of the Act on Financial Business, cf. Statutory Order No. 406 of 29 March 2022, Section 7, paragraph 2, and Section 26, paragraph 4, of the Act on Financial Advisors, Investment Advisors and Mortgage Credit Intermediaries, cf. Statutory Order No. 2016 of 1 November 2021, and Section 8a, paragraphs 2 and 7, and Section 22, paragraph 4, of the Act on Real Estate Credit Companies, cf. Statutory Order No. 285 of 1 March 2023, it is hereby stipulated:

Chapter 1
Scope and Definitions

Section 1. This Order applies to the following activities that provide or intermediate mortgage credit agreements:

1. Danish financial businesses, cf. Section 5, paragraph 1, no. 1, of the Act on Financial Business, and foreign financial businesses that conduct business in this country, including through branch establishment or cross-border provision of services.
2. Danish mortgage credit intermediaries, cf. Section 2, no. 2, of the Act on Financial Advisors, Investment Advisors and Mortgage Credit Intermediaries, and foreign companies that conduct mortgage credit intermediation in this country, including through branch establishment.
3. Real estate credit companies that professionally provide mortgage credit agreements, cf. Section 1, paragraph 2, no. 2, of the Act on Real Estate Credit Companies.

Section 2. In this Order, the following terms are defined:

1. Mortgage credit agreement:
   a) A credit agreement whereby a creditor grants or undertakes to grant a borrower credit secured by a mortgage or other security on immovable property used for residential purposes, or another right related to immovable property used for residential purposes. b) A credit agreement whereby a creditor grants or undertakes to grant a borrower credit the purpose of which is the acquisition or preservation of ownership rights to land plots or to existing or projected buildings.
2. Consumer: A natural person who, in transactions covered by this Order, does not act for purposes relating to their trade, business, craft, or profession.
3. Housing cooperative: A housing community that is a housing cooperative, cf. the Act on Housing Cooperatives and Other Housing Communities.
4. Borrower: A consumer, cf. no. 2, and a housing cooperative, cf. no. 3.
5. Advice: Personal recommendations to a borrower regarding one or more transactions in connection with mortgage credit agreements, which are independent of the provision of the mortgage credit agreement and the activities provided by a mortgage credit intermediary, cf. no. 6.
6. Mortgage credit intermediary: A company that, as part of its professional main or ancillary activity, presents or offers mortgage credit agreements to borrowers, concludes such agreements with a borrower on behalf of a creditor, or assists a borrower with administration or other preparatory work prior to the conclusion of a mortgage credit agreement.
7. Mortgage credit provider: A company that, as part of its professional activity, provides mortgage credit agreements.
8. Tied mortgage credit intermediary: A mortgage credit intermediary that acts on behalf of and under the full and unconditional responsibility of one or more mortgage credit providers who do not represent a majority of the market.
9. Package sale: The offer or sale of a mortgage credit agreement in a package with other separate financial products or services, where the mortgage credit agreement is also made available individually to the borrower, but not necessarily on the same terms as when it is included in a package with ancillary services.
10. Combination sale: The offer or sale of a mortgage credit agreement in a package with other separate financial products or services, where the mortgage credit agreement is not made available individually to the borrower.
11. Mortgage credit agreement in foreign currency:
    a) A mortgage credit agreement where the credit is issued in and must be repaid in a currency other than the one in which the borrower primarily receives income or holds assets, and from which the mortgage credit agreement must be repaid. b) A mortgage credit agreement issued in a currency other than the currency applicable in the country within the European Union or the country with which the Union has concluded an agreement in the financial field, in which the borrower is resident at the time of concluding the mortgage credit agreement.
12. Durable medium: A device enabling the borrower to store information addressed personally to the borrower in a way accessible for future consultation for a period of time adapted to the purpose of the information, and allowing for the unaltered reproduction of the stored information.
13. Real estate credit-like loan: A loan that, at the time of borrowing, has an agreed term of more than 10 years and a principal amount of at least 100,000 DKK. Furthermore, the loan must be secured by a mortgage on an owner-occupied home, a holiday home, or a farm that can be mortgaged according to the rules for owner-occupied homes and holiday homes, located in Denmark, and the loan must, at the time of borrowing, fall within the loan limits following from Sections 5 and 7 of the Act on Real Estate Credit Loans and Real Estate Credit Bonds. For loans granted by a credit institution, the loan must be capable of serving as security for covered bonds or bonds that can be described as covered bonds, while for loans granted by a real estate credit company, there is a requirement that the security must not be granted in the form of a registered mortgage deed or a discharge certificate.
14. Ancillary service: A service offered to the borrower in connection with the mortgage credit agreement.
15. Commercial practice: Any act, omission, conduct, representation, or commercial communication, including advertising and marketing, by a trader, directly connected with the promotion, sale, or supply of a product to borrowers.
16. Good commercial practice: The standard of special skill and care which a trader may reasonably be expected to exercise towards borrowers, which is commensurate with honest market practice and/or the general principle of good faith in the trader's field of activity. The concept covers the same as the concept of 'professional diligence' used in Directive 2005/29/EC on unfair business-to-consumer commercial practices.
17. Invitation to purchase: Commercial communication which indicates characteristics of the product and the price in a manner appropriate to the medium used and thereby enables the consumer to make a purchase.
18. Debtor interest rate: The interest rate expressed as a fixed or variable percentage, applied on an annual basis to the utilized credit facilities.
19. Guidance: Comprehensive explanations.

Chapter 2
Good Practice etc.

Good Practice

Section 3. A mortgage credit provider or a mortgage credit intermediary shall act honestly and fairly towards its customers, subject to paragraph 2.
Paragraph 2. If the commercial practice in question affects the borrower's economic interests, Sections 4-9 apply instead of paragraph 1. If the commercial practice in question simultaneously contravenes considerations not intended to safeguard the borrowers' economic interests, including considerations of taste and decency, safety and health, or other considerations, or if the commercial practice in question is regulated by contract law, paragraph 1 applies in addition to Sections 4-9.

Good Commercial Practice

Section 4. A mortgage credit provider or a mortgage credit intermediary shall act honestly, transparently, and fairly and in accordance with good commercial practice.

Misleading Actions

Section 5. A mortgage credit provider's or mortgage credit intermediary's commercial practice must not contain false information or, by its presentation or in any other way, mislead or be expected to mislead the average consumer, regardless of whether the information is factually correct.
Paragraph 2. Misleading under paragraph 1 may relate to one or more of the following elements:

1. The existence or nature of the product.
2. The main characteristics of the product.
3. The extent of the mortgage credit provider's or mortgage credit intermediary's obligations, the justification for the commercial practice, and the nature of the sales process used.
4. Declarations or symbols with direct or indirect endorsement or approval of the trader or their products.
5. The price, the manner in which the price is calculated, or a special price advantage.
6. Need for after-sales service, spare parts, replacement, or repair.
7. The characteristics and rights of the mortgage credit provider, mortgage credit intermediary, or their agents.
8. The borrower's rights.
9. The mortgage credit provider's or mortgage credit intermediary's compliance with a code of conduct which they state they are bound by.
10. Confusion with a competitor's product, trademark, or business name.
    Paragraph 3. Marketing of mortgage credit agreements shall be carried out in a reasonable, unambiguous, and non-misleading manner. The marketing must not use wording that can create incorrect expectations among borrowers regarding the availability of the mortgage credit or the costs associated with it.

Misleading Omissions and Invitations to Purchase

Section 6. A mortgage credit provider's or mortgage credit intermediary's commercial practice must not mislead by omitting or hiding material information or by presenting material information in a unclear, unintelligible, ambiguous, or inappropriate manner.
Paragraph 2. In relation to invitations to purchase, the following information is considered material:

1. The product's main characteristics to an extent corresponding to the medium and the product.
2. The physical address and name of the mortgage credit provider or mortgage credit intermediary, and, if another mortgage credit provider or mortgage credit intermediary acts on their behalf, the physical address and name of this mortgage credit provider or mortgage credit intermediary.
3. Matters relating to payment, delivery, and performance of the agreement, to the extent that these matters deviate from what is customary in the industry.
4. The mortgage credit provider's or mortgage credit intermediary's procedure in connection with complaint handling, to the extent that it deviates from what is customary in the industry.
5. Right of withdrawal, right of cancellation, or right of return, if the borrower has such a right.
6. The price including VAT and taxes.
7. Additional costs relating to freight, delivery, or postage, to the extent that such costs are charged.
   Paragraph 3. When the nature of the product means that the price cannot reasonably be calculated in advance, the mortgage credit provider or mortgage credit intermediary must inform how the price is calculated. When costs relating to freight, delivery, or postage cannot reasonably be calculated in advance, it must be stated that such costs may arise. Paragraph 4. A mortgage credit provider or mortgage credit intermediary must clearly inform of the commercial intent behind any form of commercial practice, including advertising. Section 8 applies correspondingly. Paragraph 5. In assessing whether information has been omitted under paragraphs 1 and 4, account shall be taken of whether the mortgage credit provider or mortgage credit intermediary uses a medium that only allows limited space or time to convey the information, and what measures the mortgage credit provider or mortgage credit intermediary has taken, if any, to make the information available to borrowers in other ways.

Aggressive Commercial Practice

Section 7. A mortgage credit provider or mortgage credit intermediary must not, in their commercial practice, use harassment, unlawful coercion, violence, or undue influence, which are suitable to significantly restrict the borrower's freedom of choice in connection with a product.

Significant Distortion of Economic Behavior

Section 8. It is a condition for acting in breach of Sections 4-7 that the commercial practice in question significantly distorts or is expected to significantly distort the economic behavior of the average consumer or, if the commercial practice is directed at a specific group of borrowers, of an average member of this group.
Paragraph 2. A commercial practice which a mortgage credit provider or mortgage credit intermediary may reasonably be expected to distort the economic behavior significantly only among a clearly identifiable group of borrowers who are particularly vulnerable to this practice or the product in question, including due to mental or physical disabilities, age, or credulity, is assessed based on an average member of this group.

Forms of Commercial Practice Always Considered Misleading or Aggressive

Section 9. Regardless of whether there is a breach of Sections 5-7, a mortgage credit provider or mortgage credit intermediary must not use the forms of commercial practice listed in Annex 1.

Chapter 3
Formal Requirements and Terms

Section 10. A mortgage credit provider or a mortgage credit intermediary must conclude or confirm all material agreements with borrowers in paper format or on another durable medium. An agreement must contain a description of the parties' main rights and obligations as well as the financial services covered by the agreement.
Paragraph 2. Terms included in the agreement may be stated by reference to separate documents, including a mortgage credit provider's or mortgage credit intermediary's general business terms.

Section 11. Terms in the mortgage credit agreement regarding changes to interest rates, fees, contributions, or other remuneration must be clearly highlighted in the agreement and must contain an indication of the circumstances that can trigger a change, and must not give the mortgage credit provider or mortgage credit intermediary arbitrary access to make changes.
Paragraph 2. Changes to interest rates in mortgage credit agreements to the detriment of the borrower must not take place without prior notice, which must not be shorter than one month. The notice must contain a justification for the change. Changes to fees, contributions, or other remuneration for mortgage credit agreements cannot take place without notice of three months or more and must contain a justification for the change. The notice in the 1st and 3rd sentences does not apply to changes based on external circumstances over which the mortgage credit provider or mortgage credit intermediary has no influence. In the case of changes in contributions and significant changes in other remuneration or the charging of a new remuneration, the notice must be given to the borrower by individual communication before the change takes effect. If the borrower has the right to terminate an agreement, this must be stated in the notice as well as under what conditions the borrower can terminate the agreement. Paragraph 3. If a mortgage credit provider or mortgage credit intermediary terminates a mortgage credit agreement, the termination must be objectively justified and made in paper format or on another durable medium. Paragraph 4. Paragraph 2 does not apply to real estate credit loans and real estate credit-like loans granted to a consumer, cf. Section 53b of the Act on Financial Business.

Chapter 4
Disclosure Requirements and Marketing

Information to be Provided Before Carrying Out Activities as a Mortgage Credit Intermediary

Section 12. A mortgage credit intermediary must, before carrying out activities covered by this Order, provide the borrower with the following information in paper or on another durable medium:

1. The company's name and physical address.
2. The public register of the relevant supervisory authority where the company is registered, the registration number or equivalent identification information, and how the borrower can verify the registration.
3. Whether the company is exclusively affiliated with or collaborates with one or more mortgage credit providers. The mortgage credit intermediary must inform the name of the mortgage credit provider(s) on whose behalf the mortgage credit intermediary acts.
4. Whether advice is provided.
5. Information on any fee for the mortgage credit intermediary's services or, if this is not possible, information on the fee calculation method.
6. Information on the size of any commissions or other benefits that a mortgage credit intermediary or their employee receives in connection with the provision of the service, which are relevant and known. The borrower is informed that the information is provided in the ESIS form if it is not available at the time of notification.
7. Information on the complaint body and procedure in connection therewith.
   Paragraph 2. If a non-tied mortgage credit intermediary receives commission from one or more mortgage credit providers, this must, upon the borrower's request, inform how much the commission varies that the different credit providers offering mortgage credit agreements to the borrower must pay. The borrower must be informed of their right to request such information. Paragraph 3. If a mortgage credit intermediary charges a fee from the borrower and additionally receives commission from a mortgage credit provider or third party, the mortgage credit intermediary must inform the borrower to what extent the commission is either wholly or partially offset against the fee. Paragraph 4. Information on the fee that the borrower may have to pay to the mortgage credit intermediary for their services must be communicated by the mortgage credit intermediary to the mortgage credit provider for the purpose of calculating the Annual Percentage Rate of Charge (APRC).

General Information on Mortgage Credit Agreements

Section 13. Mortgage credit providers or tied mortgage credit intermediaries must at all times make clear and understandable general information about the mortgage credit agreements available in paper, on another durable medium, or in electronic form.
Paragraph 2. Such general information must at a minimum include the following information:

1. Name and physical address of the sender of the information.
2. Purpose for which a mortgage credit agreement can be used.
3. Form of security, including, where relevant, whether the possibility for the security to be located in another Member State.
4. The term of the mortgage credit agreement.
5. Which debtor interest rates are offered, and whether the interest rate is fixed or variable or both, with a short description of the characteristics of fixed and variable interest rates, including the associated consequences for the borrower.
6. The names of the benchmarks and their administrators and the potential effects for the borrower, if there are available agreements using a benchmark as defined in Article 3, paragraph 1, no. 3, of Regulation (EU) 2016/1011 of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts or for measuring the performance of investment funds.
7. Indication of a foreign currency or the foreign currencies, if a mortgage credit agreement can be concluded in foreign currency, including an explanation of the consequences for the borrower if a mortgage credit agreement is given in foreign currency.
8. A representative example of the total credit amount, the total costs for the borrower in connection with a mortgage credit agreement, the total amount to be paid by the borrower, and the Annual Percentage Rate of Charge (APRC).
9. A range of different options for repaying a mortgage credit agreement to the creditor, including the number, frequency, and size of periodic installments.
10. Any additional costs for the borrower in connection with the credit, which must be paid in connection with a mortgage credit agreement.
11. Where relevant, a clear and explicit statement that compliance with the terms and conditions of a mortgage credit agreement does not guarantee repayment of the total credit amount under the mortgage credit agreement.
12. The terms directly relating to early repayment of a mortgage credit agreement.
13. Whether an assessment of the property is necessary and, if so, who is responsible for ensuring that the assessment is carried out, including whether this entails any costs for the borrower.
14. The ancillary services that the borrower may have to purchase to obtain a mortgage credit agreement or to obtain a mortgage credit agreement on the stated terms and conditions, and, if applicable, a clarification of whether the ancillary services can be purchased from a provider other than the mortgage credit provider.
15. A general warning about the possible consequences of failing to comply with the obligations in connection with a mortgage credit agreement.

Disclosure Requirements in Connection with Marketing of Mortgage Credit Agreements by Mortgage Credit Providers and Mortgage Credit Intermediaries

Section 14. Any marketing of mortgage credit agreements that states an interest rate or figures relating to the costs in connection with the mortgage credit must contain the following standard information:

1. The identity of the mortgage credit provider or mortgage credit intermediary.
2. The mortgage or other security underlying the mortgage credit agreement.
3. The debtor interest rate, and whether it is fixed or variable or both, together with information on the fees included in the costs in connection with the mortgage credit agreement.
4. The total credit amount.
5. The Annual Percentage Rate of Charge (APRC), cf. Section 16 of the Credit Agreement Act, which must have at least equally prominent placement in the marketing as any interest rate indication for the mortgage credit.
6. The term of the mortgage credit agreement.
7. The size of the payments.
8. The total amount and number of payments to be paid by the borrower.
9. Warning that any fluctuations in exchange rates may affect the amount to be paid, if loans in Denmark are marketed in a currency other than Danish kroner.
   Paragraph 2. The standard information, cf. paragraph 1, must be provided clearly, concisely, and in a prominent manner. The standard information, cf. paragraph 1, nos. 3-8, must be shown using a representative example using one of the two standard assumptions in Annex 2, which is closest to the type of mortgage credit offered. If the mortgage credit is only offered under other assumptions than the standard assumptions set out in Annex 2, the commonly used assumptions for the marketed mortgage credit must be used when stating the representative example. Paragraph 3. If the conclusion of an agreement for an ancillary service, particularly an insurance, is mandatory to obtain the mortgage credit or to obtain the mortgage credit on the stated terms and conditions, and the costs of such an agreement cannot be calculated in advance, the obligation to conclude such an agreement must be stated clearly, precisely, and in a prominent place together with the Annual Percentage Rate of Charge (APRC), cf. paragraph 1, no. 5. Paragraph 4. The information in paragraphs 1 and 3 must be easily readable or clearly audible depending on the medium used for marketing.

Obligation to Provide Borrowers with Information Free of Charge

Section 15. A mortgage credit provider or