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One of this blog’s authors chose nine questions to analyse the 2016 reform of mortgage credit in Belgium. When the Central Individual Credit Register published its 2015 report in early 2016, it emerged, unsurprisingly, that mortgage credit remained, at 25.8%, the second most frequently used form of credit by individuals, the first being credit facilities (56.7%). This single statistic sufficiently shows the importance of this type of credit, notably socially.
Introduction: the new regulation of mortgage credit in Belgium
On the regulatory front, while the Act of 4 December 1992 enjoyed relative stability, the last two years brought a major overhaul. Besides integrating most of that Act’s provisions into the Code of Economic Law, more precisely its Book VII (Payment and credit services), through the Act of 19 April 2014, it was above all the adoption of Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to residential immovable property that prompted the reform. The fruit of a decade of European work, it aims to establish a regulatory framework for home loan agreements and certain aspects of the supervisory and prudential rules for lenders and credit intermediaries. Its main objective is to promote responsible lending, and it provides mandatory rules on consumer information and transparency; in reality it seeks to give consumers protection similar to that existing in consumer credit. This minimum-harmonisation directive (save on a few specific points) was to be transposed into Belgian law by 21 March 2016. While the Act of 19 April 2014, as implemented by the Royal Decree of 29 October 2015, had already transposed the supervisory and prudential rules, the regulatory provisions were still missing. That is precisely what the Belgian legislature pursued in adopting the Act of 22 April 2016 amending and inserting provisions on consumer credit and mortgage credit into several books of the Code of Economic Law (the Act of 22 April 2016), which entered into force on 1 December 2016. This examination does not claim to be exhaustive but seeks to portray Book VII of the Code of Economic Law as in force from 1 December 2016 as regards the new mortgage credit, through nine questions: the scope ratione personae; the scope ratione materiae; the pre-contractual phase; how the credit agreement is concluded; ancillary contracts and services; the performance of the credit agreement; termination; security; and the sanctions for breaches.
Conclusion
Beyond our interest in these questions, this new law does not, in our view, constitute a revolution. On the one hand it codifies many obligations on lenders and intermediaries that doctrine, case law and the European voluntary code of conduct on pre-contractual information for home loans had already developed, including on handing over a standardised information sheet. On the other, it aligns many provisions with those applicable to consumer credit; a parliamentary question in the preparatory works reflects this perception. Consumer protection is certainly reinforced, and consumers should enjoy better comparison tools in seeking the most advantageous financing.
We can only regret, however, that this increased protection is once again achieved through documentary proliferation, which risks discouraging consumers even more from reading all the documents given to them. In reality, it is not so much the documents handed to consumers that will increase their protection, but rather the supervisory authorities in carrying out their tasks. On a technical and practical level, Directive 2014/17 required a decade of work to reach a normative text that still leaves Member States some freedoms. The time taken to draft it reveals a certain paradox, since its transposition had to be effective within 24 months, a deadline Belgium could not meet. The paradox becomes an odd feeling when one notes that the Belgian legislature justified the delay by the technicality and scale of the bill, yet allowed businesses active in mortgage credit barely eight months to implement the Act. Some implementing royal decrees had not yet been published. The method seems to show either insufficient knowledge of the sector or a failure to take its concerns into account.
Not all businesses active in mortgage credit have necessarily followed the legislative developments; some had never faced notions such as the APRC. For all professionals, IT systems must be modified, procedures adapted, legal provisions assimilated and staff trained in time. The entry into force on 1 December 2016 will not allow all professionals to enjoy optimal conditions to meet the legislature’s requirements, even those with substantial legal and human resources. We struggle to understand this haste, when the abuses identified at European level that justified the directive concern above all Member States other than Belgium. In our view, it is imperative that the entry into force be postponed to at least June 2017. More broadly, for the largest financial institutions, the technical and legal requirements of the Act of 22 April 2016 come amid uninterrupted regulatory inflation for more than fifteen years: after a banking crisis and a sovereign debt crisis, financial institutions have faced, sometimes repeatedly on the same subject, MiFID 1 and 2, Twin Peaks, the Code of Economic Law, the insurance law, the rules on the distribution of financial instruments, Solvency 1 and 2, AIFM, UCITS 1 to 5, EMIR, interchange fees, PRIIPS, CRD 1 to 4, CRR and the new banking law, the regulation of financial planning, European delegated acts, and so on. Perhaps it would be appropriate to let banking and financial professionals catch their breath and assimilate the inflation of reforms which, though mostly legitimate and desirable, tend to tire those implementing them, contributing to an impression of regulatory asphyxiation resulting from the accumulating mass of texts and regulatory layers. To quote H. de Vauplane, good regulation is also regulation that knows how to alternate times of reform and times of pause; since the move to the single currency, Europe’s financial markets have seen nearly twenty years of uninterrupted reforms, and it is now urgent to pause and let finance players assimilate the thousands of pages of directives, regulations and other texts published over the past decade.
This article was published in a collective work edited by Larcier.
This article is a translation and a condensed version. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.
