Consumer credit agreements
Last update
Summary:
A consumer credit agreement is an agreement whereby a professional lender agrees to extend credit to a consumer in the form of a deferred payment, a loan or any other similar financial accommodation.
A consumer credit agreement is a contract between a professional lender and a consumer, whereby the lender agrees to extend credit to the consumer in the form of a:
- deferred payment; or
- a loan; or
- any other similar financial accommodation.
An arrangement is not considered to be a consumer credit agreement when the consumer has purchased a subscription and makes payments over:
- the period when the services are provided (e.g. a paid newspaper subscription; or
- the period when the goods are delivered (e.g. a paid subscription to a meal delivery platform).
Who is concerned
Professional lenders, credit intermediaries as applicable, and the consumer who enters into a consumer credit agreement.
The most common consumer credit agreements are:
- loans granted to purchase goods (car, boat, etc.);
- loans granted to finance services (trip, home renovation, etc.).
Certain types of agreements are not covered by the rules which apply to consumer credit agreements, such as credit agreements:
- that are backed by a mortgage, for the purpose of purchasing:
- a dwelling; or
- building land;
- in the form of an overdraft facility payable within one month.
Prerequisites
Before signing a credit agreement, the lender or credit intermediary is required to provide the consumer with the following information:
- the type of credit being offered;
- the total amount of credit and the direct debit conditions;
- the term of the credit agreement;
- the interest rate;
- whether or not there is a right of withdrawal;
- the risks and consequences of a credit repayment default.
This enables the consumer to:
- compare the different offerings available on the market;
- determine whether the credit agreement being offered suits their needs and financial situation.
This information is:
- formulated on the basis of a special form ('standard European consumer credit information'); and
- shared in hard copy or on another durable medium (email, secure document-sharing space, etc.).
See the full list of information (French, Pdf, 195 Kb) that the lender or credit intermediary is required to provide the consumer with before concluding the credit agreement.
If the credit is offered at a point of sale, the lender or credit intermediary:
- must ensure that the consumer receives the required information:
- at the point of sale, in a form that is complete and appropriate;
- under conditions that guarantee that all correspondence is confidential;
- can compile all other information in a document that will be appended to the 'standard European consumer credit information' form.
If the credit agreement is entered into by phone, the lender or credit intermediary must:
- obtain the consumer's prior authorisation to phone them and offer them a distance contract for financial services;
- during the phone call, disclose to the consumer the main features of the financial service:
- the total amount of credit and the direct debit conditions;
- the term of the contract;
- the interest rate;
- the amount, number and frequency of the payments;
- the description of the good or service;
- their cash price, if the credit is granted as a deferred payment for a good or service.
The lender may also, at the consumer's request, send the consumer a free copy of the draft credit agreement, unless the lender already knows at the time of the request that they do not intend to enter into an agreement with the consumer.
It should be noted that these pre-contractual obligations do not apply to suppliers of goods or services who act as credit intermediaries as a secondary line of business.
Preliminary steps
Before entering into the agreement, the lender must check the consumer's creditworthiness. To do this, the consumer is required to share all the information needed for this verification:
- their ongoing financial commitments (loans); and
- their current income (salary, pension, etc.).
If the consumer lives in another Member State, the lender will check that Member State's appropriate databases if need be.
How to proceed
Conclusion of the contract
The credit agreement is drawn up:
- in hard copy or on another durable medium;
- in 2 copies, signed by the parties.
Various items of information must be provided in the contract, such as:
- the type of credit;
- the term of the credit agreement;
- the total amount of credit and the direct debit conditions;
- the interest rate;
- where applicable, the amortisation schedule.
See the full list of information (French, Pdf, 327 Kb) to be provided in the consumer credit agreement.
If, according to the agreement, the payments the consumer makes do not immediately repay the amount they borrowed, the agreement must clearly state the risk for the consumer if they are unable to repay this credit in full by the due date, unless they have a specific guarantee.
Modification of the lending rate
The consumer must be notified on a durable medium:
- of any change in the lending rate (interest rate):
- before the rate change takes effect;
- if this change in the lending rate does not result from a publicly disclosed reference rate;
- of the amount of the payments to be made after the new rate takes effect;
- of the number and frequency of the payments.
Right of withdrawal
Exercising the right of withdrawal
The consumer:
- has 14 calendar days to withdraw from the credit agreement;
- may notify the lender of their decision either verbally or in writing;
- is not required to state their reasons for withdrawing from the agreement;
- must comply with any rules governing the right of withdrawal that the lender may have informed them of.
Because it is the consumer's responsibility to provide evidence of their withdrawal, it is advisable to send a registered letter with acknowledgement of receipt to notify the lender of their decision.
The withdrawal period begins:
- either on the day the credit agreement is entered into; or
- after the agreement is entered into, the day on which the consumer receives:
- the general terms and conditions of the credit agreement (contractual clauses and conditions, etc.) ; or
- the information to include in the credit agreement.
Consequences for the credit agreement
Withdrawing from the agreement:
- means that the credit agreement is:
- automatically terminated; and
- deemed never to have existed;
- also entails the automatic termination, without penalties, of all ancillary agreements/contracts (e.g. insurance policy).
If any credit was already debited, the consumer must, after notifying the lender in writing of their withdrawal, pay:
- the capital and stipulated interest within 30 calendar days; or
- interest at the statutory rate, if the payment has not been made within 30 days.
They are not required to pay the lender any additional compensation, unless the lender was required to pay a public administration:
- any costs; or
- a sum they are unable to recoup.
Early repayment
Repayment procedure
The consumer may, at any time:
- notify the lender, either in writing or on another durable medium, of their intention to repay the credit; and
- repay the credit agreement early, either in full or in part.
Once the lender has been notified that the consumer wishes to repay the credit early, the lender must promptly disclose to the consumer:
- the exact amount of the total reduction of the credit, which is equal to the interest and costs due for the remainder of the agreement;
- where applicable, the amount of compensation the consumer must pay them.
Compensation to be paid to the lender
In the event of early repayment, the consumer may also need to pay the lender a compensatory amount, if:
- the amount of the early repayment exceeds EUR 10,000 over a one-year period;
- the early repayment occurs in a period for which the lending rate is fixed.
No compensation is due:
- if the early repayment is made in connection with an insurance contract that guarantees the credit; or
- if there is an overdraft facility on a bank account; or
- if the early repayment occurs in a period for which the lending rate is not fixed.
The amount of the compensation may not exceed:
- 1% of the repaid amount, if the length of time remaining until the agreed termination of the credit agreement exceeds one year;
- 0.5% of the repaid amount, if the length of time remaining until the agreed termination of the credit agreement does not exceed one year.
If the lender can demonstrate that they suffered harm that exceeds the ceiling set by law, they can, as an exception, claim compensation in an amount:
- that exceeds this ceiling;
- that is equal to the harm actually suffered.
If the compensation claimed exceeds the harm actually suffered by the lender, the consumer may claim a corresponding reduction.
The compensation for early repayment paid to the lender may not exceed the sum of the interest the consumer would have had to pay if the contract had been performed until the end of its term.
Assignment of rights
If the lender assigns their rights that derive from the agreement, or they assign the agreement itself to a third party, the consumer:
- may claim from this third party all defences they would have been able to invoke with regard to the initial lender (e.g. a right to legally authorised compensation, if this right had been stipulated in the agreement);
- must be informed of the assignment, unless the original lender, with the consent of the assignee, continues to manage the credit agreement.
Overdraft
If the agreement between the parties provides for the opening of a current account that can be overdrawn, the lender must regularly inform the consumer, in a hard copy document, or on any other durable medium, of any changes in:
- the lending rate (or interest rate) and the related conditions;
- any reference rate applicable to the lending rate;
- existing fees, including any changes related thereto;
- fees to be paid by the consumer;
- the conditions under which these charges may be changed.
If the the account is overdrawn for more than one month, the lender shall promptly notify the consumer in writing of:
- the overdraft and its amount;
- the lending rate;
- any penalties, fees or interest on late payment to be paid.
If the the account is overdrawn for more than 3 months, the lender shall immediately offer the consumer another type of credit agreement.
Termination of open-end credit agreements
The consumer may terminate an open-end credit agreement at no cost:
- at any time; or
- in accordance with the notice period set by the parties. This period may not exceed one month.
The lender may not terminate the credit agreement and thus put an end to the consumer's drawdown right unless:
- this possibility is foreseen in the credit agreement; and
- they adhere to a 2-month notice period; and
- they cite objectively justified reasons.
They must then notify the consumer of the termination and the reasons for it in a hard copy document or on another durable medium:
- before the termination, if possible; and
- immediately afterwards, at the latest.
However, the lender does not have the right to notify the consumer if the communication of this information is:
- prohibited by law; or
- runs counter to the objectives of public order or public security (e.g. suspicion of money laundering).
Remedies regarding related credit agreements
The consumer is entitled to seek remedies against the lender if they have failed to obtain satisfaction from the provider or service provider, if the goods or services:
- are not supplied; or
- are supplied only in part; or
- are not in conformity with the contract for the supply of goods or services.
Doorstep selling
In the case of doorstep selling, the lender:
- is required to respect the consumer's choice to refuse to be canvassed (indicated by the display of a distinctive sign); and
- cannot ignore the consumer's request that they leave the premises or that they do not return.
If the lender fails to comply with these obligations, they run the risk of severe sanctions.
Who to contact
-
Directorate for Consumer Protection
- Address:
-
271, route d’Arlon
L-1150
Luxembourg
Luxembourg
B.P. 119, L-2011 Luxembourg
- Phone:
- (+352) 247 73 700
- Email address:
- info@mpc.etat.lu
- Website:
- https://mpc.gouvernement.lu/en.html
-
Directorate for Consumer Protection
Passenger complaints
- Address:
- 271, route d’Arlon L-1150 Luxembourg Luxembourg
- Email address:
- passagers@mpc.etat.lu
-
Luxembourg Consumer Protection Association (ULC)
- Address:
- 55, rue des Bruyères L-1274 Howald
- Phone:
- (+352) 49 60 22 1
- Fax:
- (+352) 49 49 57
- Email address:
- info@ulc.lu
- Website:
- https://www.ulc.lu
Closed ⋅ Opens at 8.00
- Tuesday:
- 8.00 to 12.00
- Wednesday:
- 8.00 to 12.00
- Thursday:
- 8.00 to 12.00
- Friday:
- 8.00 to 12.00
- Saturday:
- Closed
- Sunday:
- Closed
- Monday:
- 8.00 to 12.00
In the afternoon only by appointment. -
Luxembourg Consumer Protection Association (ULC)
Luxembourg Commission for Travel Litigation (CLLV)
- Address:
- 55, rue des Bruyères L-1274 Howald
- Phone:
- (+352) 49 60 22 205
- Fax:
- (+352) 49 49 57
- Email address:
- contact@cllv.lu
- Website:
- https://www.ulc.lu
Related procedures and links
Procedures
Links
Further information
-
Luxemburgish Consumer Protection Association (ULC)
Website
-
European Consumer Centre Luxembourg
Website
-
Financial products and services
on Your Europe
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Informations à fournir au consommateur avant la conclusion d’un contrat de crédit à la consommation
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Informations obligatoires à mentionner dans le contrat de crédit à la consommation
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Informations obligatoires devant figurer dans les publicités
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Liste des contrats non soumis aux règles du contrat de crédit à la consommation
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