OREANDA-NEWS. July 11, 2011. Amendments to the Law of Obligations Act arising from the EU Consumer Credit Directive enter into force, making it easier for clients to compare loan offers from banks. Banks are ready for the changeover to the new procedure and consider the change to be an important step in providing banking services, reported the press-centre of Estonian Banking Association.

„The members of the Banking Association consider responsible lending and better understanding of banking services to be important. As of 1 July, banks take information sheets into use which provide clients a good overview of the offers from different banks. Everything will be in an identical and easily comparable format,” said Riho Unt, Chairman of the Board of the Banking Association.

Before entering into a loan contract, clients receive a standardised information sheet from every bank from which they ask for an offer. This applies to debenture loans, such as small loans, credit cards and overdraft, and to loans secured by mortgages, such as housing loans. So far the banks have provided pre-contractual information on housing loans in a similar format on their own initiative.

Information sheets shall contain the name and contact details of the creditor, description of the credit product, including the maximum loan amount, term of contract, repayment amount and the total amount of all payments related to the loan. Information sheets shall also include annual interest rate and annual percentage rate of charge indicating total credit costs which is expressed as an annual percentage rate of the amount of credit or the maximum amount of credit. Information sheets shall contain the amount of the loan contract fee and the expenses that accompany delay in the payments.

Andres Sooniste, Head of the Consumer Protection Board, added that all lenders shall present an information sheet, regardless of whether the lenders are banks or other companies, for example SMS lenders.

Pursuant to the EU Directive, from now on, loan advertisements shall include an example of a typical loan with the annual percentage rate of charge. The Directive also establishes that the client's right of withdrawal from a credit contract is extended from the current seven days to fourteen days.