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Mortgage Credit Directive













          Key provisions of the MCD affecting credit intermediaries                        Background                              In autumn 2019, the European Banking Authority (EBA) contacted BIPAR in preparation of its review of the Regulatory
                                                                                                                                   Technical Standards (RTS) on the minimum amount of professional indemnity insurance (PII) cover for mortgage credit
          The MCD is a minimum harmonisation Directive, with the exception of its provisions                                       intermediaries.
          regarding the European Standardised Information Sheet (ESIS) and the Annual     The Directive on credit
          Percentage Rate of Charge (APRC) that are maximum harmonisation.            agreements for consumers
          •   Credit intermediaries are required to respect conduct of business rules   relating to residential immovable          BIPAR provided EBA with data in relation to:
             and rules regarding knowledge and competence of staff, give general pre-                                              •   PII taken out by financial services firms like insurance intermediaries (required under the IDD, since 2016) and in
             contractual information as well as personalised pre-contractual information   property (“Mortgage Credit                  particular mortgage credit intermediaries (under the Mortgage Credit Directive - MCD, since 2016) (for example are
             through the ESIS and give adequate explanations regarding the proposed   Directive” or “MCD”) entered                     the amounts the same / higher than MCD sets out, etc.);
             agreement(s).                                                          into force on 21 March 2016.                   •   Specific numbers of PII providers, the number of contracts taken out, number & value of claims made and/or claims
          •   Credit intermediaries are required to comply with information requirements,   The Directive aims to improve              paid out, or similar.
             e.g. if they offer advisory services, the fee where applicable, the existence and
             -where  known-  the  amount  of  commissions  or  other  inducements.  At  the   consumer protection measures
             consumers’ request, non-tied intermediaries must give the variation in levels   across the EU and establishes         In March 2020, EBA published its report on the review of these RTS on PII for mortgage credit intermediaries, conclud-
             of commission (consumers must be informed of the right to ask). In case of a   principles for the authorisation       ing that there is currently no evidence that would suggest that the PII minimum monetary amounts would need to be
             combination of fee and commission, they need to mention whether they are                                              amended. EBA adds that the claims lodged by borrowers against credit intermediaries are very limited and do not sug-
             offset. The fee is communicated to the creditor for the calculation of the APRC.  and registration of credit          gest that the minimum amounts specified in the RTS are insufficient and require upwards adjustment.”
          •   Creditors and intermediaries have to explicitly inform the consumer if they   intermediaries. BIPAR monitored
             provide or can provide advisory services. Before the advice is provided, extra   the preparatory phase of the
             information has to be provided on the product range that is advised on and   Directive until its adoption             EBA has to review the RTS on PII every two years.
             on the fee (or method of calculation) - if applicable. In case of advice, creditors
             and intermediaries have to obtain the necessary information from consumers   as well as the levels 2 and 3
             regarding their personal and financial situation, preferences and objectives   proceedings. The MCD stated that       Next steps
             (suitability), have to act in the best interests of consumers and have to give a   the Commission should undertake    The Commission had to undertake a review of the Directive by 21 March 2019. It appears that there was some delay. The
             record of the recommendation.                                                                                         2019 management plan of the Commission’s DG Financial Stability, Financial Services and Capital
          •   Creditors  and  tied  intermediaries  have  to  consider  a  sufficiently  large   a review of the Directive by 21   Markets Union mentions Q2 of 2019 for the award of consultancy contract(s) for this review.
             number of agreements in their range in order to recommend a suitable or   March 2019. The outcome of this
             several suitable agreements and non-tied intermediaries have to consider a       is not yet known. .
             sufficiently large number of agreements in the market in order to recommend
             a suitable or several suitable agreements.
          •   Member States may prohibit the use of the word “advice” or advisor” or similar terms for creditors and tied intermediaries
             and they shall make independent advice/advisor conditional on: considering a sufficiently large number of agreements
             available  on  the  market  and  where  the  number  of  creditors  considered  is  less  than  a  majority  of  the  market,  not
             be remunerated for those advisory services by one or more creditors.  Member States may impose more stringent
             requirements in relation to the use of the term “independent”, including a ban on receiving remuneration from a creditor.
             Member States shall ensure that advisory services are only provided by creditors, credit intermediaries or appointed
             representatives, although exceptions are possible.
          •   The Directive foresees rules regarding the admission of intermediaries (subject to PI cover, good repute and appropriate
             knowledge and competence regarding credit agreements, according to an Annex of the Directive), cross-border activity
             and supervision.
          •   The MCD also regulates cross-selling: Member States shall allow bundling but prohibit tying. Tying is however allowed
             under certain conditions. A specific provision regarding cross-sales with insurance states that Member States may allow
             creditors to require consumers to hold a relevant insurance policy related to the credit agreement, but creditors have
             to accept the insurance policy from a supplier different to their preferred supplier where such a policy has a level of
             guarantee equivalent to the one they have proposed.






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