New revolving credit disclosure requirements
The new Banco de España Circular, implementing the requirements for information that banks must disclose to their customers when marketing revolving credit, both before it is arranged and over the term of the agreement, was published on 6 April.
Here’s a summary of the main changes that this new Circular introduces:
(i) Before arranging a revolving credit product, the bank must provide you with a representative example of the loan that includes information on the credit limit, the total amount borrowed, the interest rate applied and the APR (which takes into account fees and expenses in addition to the interest rate), the repayment term and the instalment amount. This example should provide at least two financing options, considering the following criteria:
- Where the credit agreement includes two or more interest-bearing deferred payment methods and at least one of them is the revolving payment method, a financing example for each method shall be included.
- Where deferred payment is via flexible regular instalments the word “revolving” shall be used expressly.
- The financing examples shall be determined on the basis of the minimum instalment stipulated in the agreement.
- A credit limit of €1,500 shall generally be used to calculate the example, unless you’ve requested another amount.
(ii) The bank must also send you regular correspondence that includes example saving scenarios in the case of revolving credit. If your repayment instalment is less than 25% of the credit limit, the bank must provide you with information on three possible saving scenarios:
- Simulating the amount of the instalments you would have to pay were the repayment instalment to increase by 20%, 50% and 100%.
- Stating the total amount you would end up paying, broken down into principal and interest.
- Indicating the date you would finish repaying the loan under each scenario.
These new disclosure requirements will enter into force six months after their publication in the Official State Gazette, in other words, 6 October 2022.
For more detailed information, you can find Rule three of the new Circular, which amends Circular 5/2012, here (only available in Spanish).