Introduction

The Consumer Credit Directive 2008/48/EC has been transposed into local legislation through the Financial Services (Consumer Credit) Act 2011 (“the Act”) with effect from 16th June 2011.

The purpose of Directive 2008/48/EC is to “harmonise certain aspect of the laws, regulations and administrative provisions of the Member States concerning agreements covering credit for consumers.”

Although there are some exemptions, this Act applies to loans between EUR 200 and EUR 75,000 provided that these do not relate to the purchase of property¹. Some overdrafts and overrunning are also within the scope of this Act.

The Chief Executive Officer of the Gibraltar Financial Services Commission (GFSC) has been appointed as the Director for the purposes of the Act. Please note that entities and individuals licensed under the Financial Services (Moneylending) Act are licensed by the Government of Gibraltar not by the GFSC; essentially the GFSC’s CEO is responsible for firms’ and individuals’ compliance with the conduct of business rules within the Financial Services (Consumer Credit) Act.

This legislation provides certain obligations for creditors and credit intermediaries in relation to consumers as follows:

Advertisements

Under the Act, standard information is required in any advertisement concerning credit agreements. This information must be clear, concise and made prominent.

The Act stipulates the specific information that should be included in advertising such as the total cost of the loans.

Credit agreements

The Act includes specific information that should be included in credit agreements e.g. a warning relating to the consequences of missing payments.

Additionally, before the conclusion of a credit agreement, the creditor is obliged to assess the creditworthiness of the consumer.

Information to be provided

The Act requires that the creditor provide the consumer with specific pre-contractual information such as the type of credit; the total amount of credit and the conditions governing the drawdown. This information should be provided in good time and prior to the consumer being bound by any agreement or offer.

Calculation

Under the Act creditors must use specific calculations in reaching an Annual Percentage Rate (APR). This includes some assumptions which should be taken into consideration e.g. that “the borrowing rate and other charges will remain fixed in relation to the initial level and will remain applicable until the end of the credit agreement”.

Cancellation rights

Under the Act the consumer is given a period of 14 calendar days in which to withdraw from a credit agreement without having to provide the creditor with a reason. Additionally, the consumer is permitted early repayment and the terms of this must be included within the credit agreement. The creditor may, however, charge for early repayment.

¹A full list of exemptions can be found under Section 4 of the Act.

Financial Services (Consumer Credit) Act

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